It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.

That is why List championed national developmentalism as an economic strategy to help the United States and Germany catch up with Britain. Today, the CCP also seems to be a careful student of List.

The “ladder” phrase got a second life in 2002, when the Korean economist Ha-Joon Chang used it for the title of his book on development strategy and policy. Chang’s target was the rule set—the WTO, IMF, and World Bank consensus—that, in theory, prevents developing countries from adopting the same policies, protections, and subsidies rich countries used to succeed on the way up.

But this does not describe China’s rise. The West held the ladder for the PRC, which is now trying to kick its competitors off the summit. For the PRC, there is only room for one country at the commanding heights of techno-economic commerce. Everyone else is a vassal state.

We Provided the Ladder and Held It Steady

Far from kicking the ladder away, the United States significantly aided the PRC in climbing to the techno-economic summit.

Since China opened its economy in 1978, the massive influx of foreign direct investment (FDI) into the PRC has fundamentally reshaped the global economy. By 2000, it had attracted $306 billion in FDI and become the world’s second-largest recipient, behind the United States. By May 2026, cumulative FDI in China exceeded $3.6 trillion, including investments in factories and other facilities. Much of that capital came via Western multinational corporations and neighboring Asian economies. It wasn’t just the money; it was the dynamic capabilities that came with it.

The story of Huawei shows how. In 1979, the CCP designated telecom equipment as a strategic sector for which China sought “absolute control.” The only problem: Chinese equipment was awful. So, the PRC told foreign companies that if they wanted to continue to sell in China, they had to produce in China through joint ventures (JVs) with Chinese firms.

It cannot be overemphasized how important these JVs were. Without them, Huawei might still be just a local Chinese player, and Nortel and Lucent might have fared better. The JVs were extensive. As one study noted:

In order to be successful in the [Chinese] market it would be essential for Western manufacturers to work out joint venture agreements with indigenous Chinese companies, manufacture locally, and work out extensive technology transfer agreements.

In the 1970s, China’s Ministry of Posts and Telecommunications approached virtually all foreign telecom equipment companies to explore opportunities for tech transfer through joint ventures. All refused, not wanting to give China their valuable technology. But one broke rank: Belgium’s Bell Telephone Manufacturing (BTM). It transferred the System 12 technology, at the time the most advanced in the world, to China. The Belgian government even provided financing to the Chinese business partner and agreed to transfer technology for component and chip production. As one Chinese analyst wrote, “That was remarkable. At the time, no other supplier was prepared or able to offer the transfer of such advanced technology.” BTM not only transferred key technology to its partner, Shanghai Bell, but it extensively trained managers and engineers.

This sent a clear signal to foreign companies that if they wanted to sell in China, they had better get in line and form JVs. To encourage this, the government set quotas on the import of telecommunications equipment for each firm: The more technology a company transferred, the higher its quota.

Not surprisingly, the companies fell in line. In 1993 and 1994, Siemens set up 14 JVs. Ericsson, Fujitsu, Lucent, Motorola, NEC, and Nortel all formed JVs. By 1998, Lucent had six JVs.

These JVs provided extensive help to Chinese firms. As one case study of what was presumably Nokia (the name was changed to ensure anonymity) found:

A major technology transfer project was started in mid-1998 to bring in the latest technology and this has resulted in all mobile switching equipment for the Chinese market being supplied by NHT in association with its subcontractors in China and the local partner… A large number of employees went to Europe for between one and three months in 1998 as part of the major technology transfer project….The second phase of technology transfer was to further develop the company’s subcontractors…. Local companies such as Huawei have this type of assistance.

Alcatel, Ericsson, NEC, Siemens, Sony Ericsson, Nortel, and Motorola also established freestanding R&D centers in China that trained thousands of engineers and led to technology being siphoned off to domestic Chinese companies.

Chinese industrial ministries organized engineers from other parts of the domestic industry to get training or job rotations at the JV firms. As one study notes:

The presence of many JVs in China fostered the diffusion of technology know-how across the country… there was a broad-ranging knowledge transfer and exchange involving R&D, production, subcontracting, marketing, after-sales services, and local human resource training. Shanghai Bell and other joint venture establishments fostered the diffusion of technological know-how across the country.

The Chinese general manager of the JV facility stated that the Shanghai Bell JV had been a “big school,” fostering a great number of qualified engineers in China. Now multiply this story by 100—many, many more industries involved, from machine tools to chemicals to aerospace—and you get the idea of how the West helped China climb the ladder.

Why did companies agree to what ultimately contributed to their demise or decline? The answer was clear: Do a JV or sell zero in China.

WTO accession put this process on steroids. Now, having more certainty over their investments and the ability to sell back to their home countries, the floodgates opened.

It was bad enough that companies did this, but Western governments were complicit. They failed to provide cover for their firms to say no. For years, they failed to bring WTO cases against forced tech transfer. And in some cases, they actively encouraged it. Case in point, in the early 2000s, the Bush administration’s Commerce Department held workshops encouraging American companies to invest in China. The reason? Doing so would make their cost structure more competitive with that of European and Japanese firms.

But why did most of the Western elite class, especially in Europe, the Commonwealth nations, and the United States, go along? There are three main reasons.

First, elites thought that if China was on the summit with us, their nations’ exports would boom because its market was so big. That didn’t work out because China always intended to be at the summit alone.

Second, they simply could not conceive that China could ever catch up. Indeed, in 2000, the United States was patenting at a vastly higher rate per capita than the PRC. These people were not a threat, not to us. One analyst wrote, “Under the terms of China’s accession to the WTO, the Chinese IT industry will find the competition with large global corporations, especially those based in the USA, extremely severe.”

Third, pundits, scholars, and politicians believed that once a country, even an authoritarian communist state, makes it to the summit, a magical transformation happens: democracy, free markets, and the rule of law. For a few years, it looked like the PRC was moving in that direction. But Xi put the country in reverse.

In short, the West did not kick the ladder away; it helped build it and offered the PRC a hand.

The Summit Holds One, and It’s Not America

Even if they thought China could catch up, Americans assumed there was plenty of room at the top. Come on up and join us! Beijing had different ideas. It did not want to join us; it wanted to displace us.

Every previous Asian tiger climber—Japan, Korea, Taiwan—moved up the value chain and handed the bottom rungs to whoever came next. That is what the flying-geese model described, and it left room for everyone in the formation. China moved up without letting go of anything, adding shipbuilding, solar, batteries, electric vehicles, and mature-node semiconductors while keeping textiles and assembly—and going all out to win the industries of the future.

A core instrument is engineered overcapacity. Build far more than the market can absorb. Export the surplus at prices competitors struggle to match. Collapse the world price. Wait for foreign producers to exit. Then hold the field alone. Solar shows the damage: a wave of foreign manufacturers went bankrupt as Chinese production surged and prices collapsed. China now dominates the supply chain. Shipbuilding and steel face similar pressure. Batteries and EVs are under growing pressure, too.

Nor is the damage easily reversible. If a Western nation, particularly in Europe or North America, is pushed off the top, there isno easy route back. The PRC will do everything possible to destroy the ladder, and Western nations, with their commitments to free markets, competing budget demands, short-sighted voters, and government gridlock, are in no position to build a new ladder to the top.

Let’s Pretend Life in the Valley Won’t be So Bad

Why isn’t there a sense of urgency? The lax response is in part due to many “experts” thinking that it makes no difference whether we are on the summit or in the valley, as long as market forces keep working. Others believe that America’s summit position was achieved through capitalist imperialism. Others believe that there is no summit: We all live in the happy and peaceful valley of free trade based on Ricardian comparative advantage. Still others naively hold out hope that AI will be a jet pack back to the top.

Maybe it won’t be so bad in the valley. Look at the UK—once the world’s industrial powerhouse; now better known for London finance and tourism than for making things. That can be us.

As ITIF has laid out in its National Power Industry Series, if we want any hope of regaining the top, we have to start kicking away the PRC ladder (by countering its unfair trade practices) while building our own ladder with a bold and robust domestic national advanced industry strategy.

For more of this, I encourage you to attend ITIF’s National Economic Power Industry War Conference on November 17.

For example, in the span of just one week, Anthropic alignment science lead Evan Hubinger asserted that AI could “kill all humans,” putting his publicly stated subjective probability at greater than 10 percent within the next decade; newly appointed OpenAI nonprofit board member Paul Christiano warned that, without better alignment, “most people could die,” and estimated the risk of catastrophe at 4 percent within one year; and, at an event on Tuesday, OpenAI CEO Sam Altman mentioned a possible “loss of control accident” and AI companies accumulating excessive power.

Unsurprisingly, the anxiety is measurable among the public: A new Pew survey found that 52 percent of Americans are more concerned than excited about the increased use of AI in daily life, up from 37 percent in 2021. And for the first time, a majority of young adults under 30 say they’re more concerned than excited. Job loss remains a major source of that fear, with 71 percent of adults believing AI will lead to fewer U.S. jobs over the next 20 years.

Giving in to such irrational fears is anti-progress and will mean a worse America, not a better one.

To be sure, a multitude of pundits, “civil society” groups, and politicians have jumped on the bandwagon; many of them are congenital opponents of technology and business who oppose AI simply because it is the latest and greatest thing.

Twenty years ago, these types warned that RFID chips could become the biblical “mark of the beast.” (One of the leading proponents of that absurd campaign later received enormous credibility, including a byline in Scientific American, a journal that used to stand for objectivity.) AI fearmongering makes those RFID claims look mild by comparison.

The reality is that these neo-Luddites are a permanent feature of the techno-economic policy landscape. What is different now is the rise of individuals who promote transformational AI narratives, many of them dystopian, and then have the gall to complain that too many Americans fear AI.

This is like an arsonist complaining that the neighborhood has gotten paranoid about fire.

Speaking at Salesforce’s Dreamforce conference on Tuesday, Altman warned that AI companies could accumulate excessive power and said, “The world is right to be afraid of this.” He then asked the public to trust that AI companies would “do the right thing.” Got that? The leader of one of the most prominent AI companies tells the public it is “right to be afraid,” then asks it to trust that the industry will behave responsibly. So, should the public be afraid or trusting?

Those warnings may be sincere. But when people advancing and championing AI talk this way, the industry cannot act surprised when the public takes them seriously or when politicians turn that fear into calls to halt the technology.

Case in point is billionaire and prominent AI booster Vinod Khosla, whose firm was the first venture capital investor in OpenAI. Earlier this year, Khosla stated that 80 percent of jobs will be AI-capable and open to displacement by 2030: “Will there be new kinds of jobs? Maybe, maybe not. I don’t know. There’s very few things AI won’t be able to do today in next few years. So I do think we ought to structurally solve this problem by increasing the minimum level of services.”

Then, with zero sense of irony, he went on to say, “I think the single biggest danger to AI is not AI capability or lack thereof. The single biggest danger to AI adoption is politics.” He continued by arguing that Americans shouldn’t fear AI but should instead consider its endless possibilities, offering a positive example: “The U.S. could develop a free doctor and offer it to everybody on the planet. That’s a project doable in the next two, three years.”

Just this week, Khosla published an article that once again predicted large-scale AI-driven unemployment, citing eye-popping estimates and saying he’s “as certain as I’ve been about anything.” The article proposes changes to U.S. policies and institutions to prepare for this scenario. It includes some fairly reasonable statements, including calls to “protect people and transitions, not necessarily existing jobs” and “maintain a strong safety and security posture while holding on to a lead against our AI nation-state adversaries.”

He ends by stating, “Preserving public support for AI requires giving people security.” Well, perhaps if you, Vinod, didn’t scare the bejesus out of people with attention-grabbing, economically illiterate claims about job loss, people would be less scared and more willing to accept AI.

This “be terrified but don’t be” narrative is now standard fare among tech bros.

Tech futurist Peter H. Diamandis, who describes himself as a “data-driven optimist inspiring entrepreneurs through research, investment & community to create an abundant future for humanity,” tells people not to fear AI. Yet he also talks about humanity splitting into “consumers and creators” based on how they use AI and has said AI will eventually have “the most wisdom of anything, anyone.” Welcome to your benevolent overlord. By the way, stop all that AI fear nonsense.

Mo Gawdat, the former chief business officer of Google X and a tech self-promoter, warned this summer that 30 percent of jobs in certain sectors would disappear by 2028, but also says, “Fear isn’t what we need when it comes to AI, wisdom is.” Clearly, you are short on the latter. Oh, and Mo, want to bet on your job-loss prediction? You have lots of money. How about $1,000?

His book, Scary Smart, warns that “technology today poses an unprecedented threat to our planet and all of its inhabitants” and that machines are dangerous, unmanageable, and “inevitably going to rule our future.” Good stuff for selling books. Not so good for building support for AI.

Can you imagine if, in the early 1900s, Henry Ford and Thomas Edison had touted the transformative power of cars and electricity while warning that these same technologies would kill millions of people, pollute the environment, hollow out cities—and deliver some benefits, too? Adoption would have been slower, regulation more harmful, and the outcome worse for Americans and America.

Of course, tech futurists know they have a good gig: say outlandish BS about AI destruction, and people buy your books, invite you to appear on podcasts and speak at conferences, and quote you in global (and Beltway) outlets. But if you are going to indulge in that kind of self-promotion, could you at least stop preaching that people shouldn’t be afraid? You just make yourself look dumb.

To be clear, this is not an attempt to adjudicate the ongoing AI safety debate. Anthropic CEO Dario Amodei’s recent essay, which drew endorsements from several of his leading competitors, has only intensified that debate. But Amodei is not an example of the hypocrisy I’m describing: Whether or not one agrees with his diagnosis or path forward, his warning is consistent with his proposed response. My point here is narrower.

As I’ve outlined before, efforts to reduce genuine risks and enact policies to help workers displaced by AI successfully transition to new jobs are legitimate and necessary. What is not legitimate or necessary, but is hypocritical, is for tech bros to confidently broadcast speculative, apocalyptic AI scenarios and then bewail the public fear and political backlash they predictably produce.

If AI’s supposed “champions” don’t want people to be afraid, they should stop selling fear.

The bad news is twofold.

First, little has been done beyond passing the CHIPS and Science Act, establishing the House Select Committee on the Strategic Competition Between the U.S. and the CCP, implementing some export controls, and making various minor policy and legislative tweaks.

Second, and more important, Washington is still not afraid. It should heed the warning: “Be afraid. Be very afraid.” Yet few within the establishment—including pundits, academics, government officials, journalists, and lobbyists—believe China is poised to dominate advanced and emerging industries. Consequently, they fail to appreciate the fundamental shift in global power that would occur if the PRC succeeds.

I have made this case many times. If you don’t believe the threat is real, that’s fine. But if the threat is real, what explains the widespread equanimity? The reasons are many. Here are a few I hear regularly.

“U.S. companies earn high profits; Chinese companies earn low profits. Therefore, we are stronger.” True, but beside the point. For Chinese firms backed by government subsidies, accepting low profits is a deliberate strategy to gain market share. Following the classic pattern of low-end disruption identified by Clayton Christensen, Chinese firms attack markets from the bottom, where profit margins are lower, entrench themselves, and then gradually work their way up into higher-value segments.

“The United States leads in AI and has Silicon Valley.” To listen to the Washington debate, one might think the U.S. economy starts and ends in Northern California, and that generative AI is the only important technology. Both are wrong. We cannot compete with China through Silicon Valley and AI alone. Many other industries are critical to reducing U.S. dependence on China and maintaining a strong defense industrial base. Most U.S. regions also must play key roles as innovation and production hubs.

“U.S. firms are leaders.” They are. But, as ITIF has shown, Chinese firms are gaining ground, at least as measured by R&D spending and scientific publications. Moreover, even after almost a decade of encouraging U.S. companies to leave China or at least develop alternative sources, many leading advanced U.S. companies still have a significant presence in China, helping strengthen the Chinese economy.

“We are the most innovative.” This is a nice bedtime story, but two things are wrong with it. First, innovation is only part of the equation; scaling and production are what really matter. Many cases—electric vehicles, solar panels, and batteries, to name a few—show how U.S. innovation helped develop technologies, only for China to capture much of the global market through scaled, low-cost production. Second, China is becoming increasingly innovative.

“We will innovate in areas China can’t.” This narrative holds that it may not be good that we lost to China in established industries like electric vehicles, steel, electronics, and the like, but it’s okay because we will innovate and build new industries. There are three things wrong with this. First, we cannot afford to give China a monopoly in existing advanced industries. Second, there is not enough room at the top. Even if the United States captured the most innovative emerging sectors, such as AI, fusion, synthetic biology, and quantum, these sectors are unlikely to be large enough, on their own, to produce the exports needed to balance U.S. trade. Finally, this is hubris: It ignores just how innovative China has become and continues to become.

“Communists can’t innovate.” Related to the two preceding rationales is the myth that communists can’t innovate. If that is the case, how has China reached the global forefront of the EV and EV battery industries, become the world’s leading proponent of nuclear energy, and come to lead the world by volume in both robotics production and use—all while advancing rapidly in many other areas? A Gosplan-style economy like the Soviet Union struggled to generate broad-based commercial innovation, but China does not have such an economy. It is a state-directed and state-assisted capitalist economy in which firms and entrepreneurs retain considerable commercial latitude while receiving substantial state support.

“We have long been number one, so we are in good shape.” Who cares? History is rife with examples of nations that led the world economically only to fall by the wayside. There is nothing inevitable about U.S. leadership.

“U.S. manufacturing has not declined, and job loss is due to productivity, not China.” This is widely repeated, and if true, it would suggest that the China challenge is not really a challenge. But as ITIF and others have shown, it is simply wrong. Growth in manufacturing labor productivity was slower in the 2000s than in the 1990s, even as job losses were much greater.

“Why don’t we see Chinese products in the United States? Things must be okay.” One challenge in developing a clear-eyed understanding of the China challenge is that most people, including elites, tend to extrapolate from what they see and experience. A typical member of Congress uses an iPhone from an American company, U.S.-developed AI tools, and U.S. e-commerce platforms. They don’t see the areas where China leads. In part, this is because many of China’s strengths lie in intermediate goods, like steel, chemicals, and electronic components, rather than final goods. But Chinese companies also sell here under brands whose ownership or origins may not be obvious to most Americans, including EGO outdoor power equipment and SKIL power tools (both owned by China’s Chervon), GE Appliances (owned by Haier), Volvo Cars (majority-owned by China’s Geely Holding), Hisense televisions, and Motorola Mobility (owned by Lenovo). China’s presence in U.S. markets can therefore be larger than brand recognition alone suggests.

“China has macroeconomic problems, so all is well.” People point to China’s real estate bust, zombie companies propped up by state-owned banks, high youth unemployment, slower growth, and, of course, its low birth rate. These are real weaknesses, but none guarantees that China will lose the techno-economic competition. China’s growth rate remains far below its historical peak, but it continues to exceed the U.S. rate. More importantly, even that comparison misses the point. The CCP does not prioritize economic growth and productivity above all else; it also pursues global techno-economic power by building enormous capacity across key industries. Finally, even with its declining birth rate, China is projected to have vastly more people than the United States in 30 years. If the U.S. and the West don’t respond effectively by then, it’s game over for the techno-economic competition.

“China wastes money, so the United States is better.” Of course China wastes money, and the CCP appears willing to tolerate it. As long as enough of it sticks in the form of globally successful companies taking market share from the West, the CCP does not care.

“Even if China is a problem, we have the WTO.” Many elites are still wedded to the so-called international order and believe that, to the extent China is a problem, international organizations like the WTO can deal with it. In this view, it’s just not “cricket” for the United States to take unilateral action to restrict China’s techno-economic aggression. This is fantasy.

“China is just another Asian tiger trying to develop, so we shouldn’t worry or try to hold it back.” Yes, the CCP is following a familiar East Asian development playbook. But there are two main differences. The U.S.-aligned economies that used versions of that playbook were not strategic adversaries seeking dominance across every advanced industry. And the unfair Chinese playbook—including IP theft and massive subsidies—is in a different league from the approaches taken by Japan, South Korea, and Taiwan.

“If China destroys U.S. production, the solution is to help the workers it hurts.” Setting aside the fact that such losses could be reduced dramatically with the right policies, this ignores the importance of certain industries to national power and strategic autonomy.

But the arguments above are not so much reasons as rationalizations for more fundamental positions. People look for data and arguments to support their preconceived views and values. That is the real problem. Each side—conservative and liberal—has other fish to fry, while taking China seriously requires a new agenda, just as the rise of the Soviet threat after World War II required an agenda that neither the right nor the left fully embraced.

Acknowledging China’s success means accepting that we need a more active state. If the China challenge is real, we need a national techno-industrial policy. For free-market advocates, this is the worst possible sin. We don’t want to become like China. Even if we end up with a hollowed-out, Jeffersonian economy, at least we will be free. Perhaps—but not free from China calling the global shots.

For a large share of the left, climate and social justice goals are the top priorities. If the China challenge is taken seriously as an existential threat, then business tax cuts and deregulation would be in order, and any available government revenues would need to be devoted to this cause, not to redistribution.

Finally, for the foreign policy and trade establishment that still cannot give up on its goal of a globalized economy, admitting that China is strong and poses a threat bolsters the case for either the autarkists (like many in the MAGA movement) or the dualists (like ITIF, which supports limiting Western trade and investment with China). Even the latter position is a painful pill to swallow.

Given this refusal to see reality and embrace the challenge, the outlook for timely action by Washington is bleak. Without strong action, the competition could effectively be over in 15 to 20 years. Too many forces remain in denial or opposition.

Against this backdrop, four scenarios are possible:

1. Continued incrementalism and continued decline in American techno-economic power.

2. The election of a president who makes the challenge his or her top policy priority. President Trump certainly elevated the China challenge in his first term but has relegated it in his second term. This issue will be almost impossible to address without visionary and bold leadership from the White House.

3. A major Chinese act of aggression that wakes America up. An attack on Taiwan might spur that response, but even that might not. People may simply say, Munich-style, “Let China have Taiwan, and we can all go back to normal.”

4. The overthrow of the CCP and emergence of a democracy. That appears unlikely, at least anytime soon.

So, I expect the United States to retain enough strength in some areas to preserve critical production capabilities, even as China captures a growing share of global advanced industry markets. The likely result is that more countries will have to kowtow to Beijing.

In the context of U.S.-China rivalry, I believe the United States needs its own numbered set of slogans, and since I believe there are three critical questions the nation needs to decide, I will call them the “Three Decides.”

That’s because on virtually every trade, technology, and economic policy question America now faces, the core issue is not identifying or implementing solutions. ITIF and many other think tanks have already made their suggestions and proposals. The core issue is deciding what the problem is. As long as policymakers and the public cannot decide on the core problems—and in most cases cannot even correctly conceive of what they are—the chances of successfully addressing them are about as good as blindfolded monkeys writing Shakespeare.

Where someone lands on three fundamental yes-or-no decisions determines everything else downstream, and most of the policy debate in Washington is a proxy war over these questions even though no one ever mentions them. Here they are.

Decision #1: Is being the leading global power critical to the autonomy of the U.S. Republic, and is the nation at risk of losing that power to the PRC?

If it doesn’t matter whether the PRC has more power than the United States, then why support a strong defense budget and, as ITIF has argued, a robust techno-economic power strategy? For national developmentalists, the answer is to ensure China does not dominate key industries and gain leverage to turn America into a vassal state.

Many on the right, but not all, will answer both questions in the affirmative, too. But some free-market fundamentalists will maintain that while defense spending is key, there is no real global contest for techno-economic power, and free trade automatically produces optimal outcomes based on natural comparative advantage. Others will cling to the idea that America cannot lose to communist China because the free market system is always superior to a planned economy. Still others are globalists who sometimes place the interests of other nations ahead of America’s.

While some on the left will also answer yes to these two questions, many will not. For many progressives (and for officials with the Democratic Socialists of America), American power is something to be reined in, as they see it as an historical force for oppressing people of color around the globe to serve America’s capitalists.

Moreover, in their world, the dividing line is not nation but class. They argue that the American working class has more in common with the Chinese working class than it does with American capitalists. In an ITIF debate on what the United States should do regarding China, three progressives argued that the major goal is to improve the lives of workers internationally, especially in less-developed nations, even if that comes at America’s expense. When asked whether they prioritize the interests of the American republic, including corporations, or the interests of workers around the world, progressives Dean Baker, Jared Bernstein, and Thea Lee sided with the latter. A competitiveness-based industrial strategy would mean pushing for more growth in capitalist advanced industries at the expense of China and other nations—something that is anathema to progressives.

When this is a deeply held belief, the conclusion is not only to cut defense spending, but also to view a national economic power strategy as corporate welfare that also hurts opportunities for the global poor, while adding to global warming. Joseph Stiglitz has made this case explicitly, arguing it would be better to rein in large corporations and end the “trade war” with China, as it hurts workers globally.

Decision #2: Are economic growth and innovation good, and does maximizing them require explicit, proactive policies?

If it is agreed that growth and technological innovation are good and need to be actively supported by government, then elected officials are much more likely to craft policies supporting both. If the answer to either of these is no, then most policies will effectively constrain growth and innovation.

Conservatives generally still prioritize growth, and many, particularly non-MAGA conservatives, prioritize innovation. But increasingly, MAGA Republicans have turned against innovation, seeing it as a form of control over free Americans. Florida Governor Ron DeSantis’s support for a ban on data center construction and Senator Josh Hawley’s (R-MO) opposition to a moratorium on state AI regulations are emblematic.

Hawley spoke for many Republicans last year when he stated, “I thought we were the party of individual rights.” But that is not the Republican Party of Theodore Roosevelt, who stated, “The New Nationalism puts the national need before sectional or personal advantage.” Nor is it the language of the founders, as when John Adams argued that “public virtue is the only foundation of republics.” The Republican Party used to stand for “civic republicanism,” guided by duty, not license. Indeed, when a political party champions individual rights that take precedence over national greatness, the Republic is in peril.

Moreover, even conservatives who prioritize growth and innovation generally see them as forces that drive forward on autopilot, lagging only when government gets in the way with problematic taxes and restrictive regulations. To be sure, the latter can and often does limit needed growth and innovation. But if we want to avoid losing the techno-economic war to China, we also need proactive growth and innovation policies, such as an expanded Export-Import Bank, more generous R&D credit, robust funding for collaborative, industry-led research initiatives, and limits on Chinese imports.

Liberals—and especially progressives—increasingly have even more problematic views on this front. Some have embraced a degrowth agenda to fight global warming. Others advance the inaccurate notion that growth no longer benefits American workers, and argue instead for a largely redistributive agenda in which government expands benefits for the bottom 60 percent of the labor market (e.g., free tuition and childcare, subsidized housing, national health insurance, and more). And when it comes to technological innovation, many have simply turned against it, seeing it as a tool to enrich the “tech bros” while impoverishing, spying on, manipulating, and laying off workers. Under this view, the odds of pro-growth and pro-innovation policies prevailing are quite low. The odds of anti-growth and anti-innovation policies prevailing are high.

Decision #3: Is the United States a fundamentally good, or even great, country, and where it falls short, is reform not only possible but expected?

If policymakers believe that, for all its mistakes and flaws, America is a great nation—and that reform is not only possible but has been the pattern of American governance since the founding—then they will be significantly more likely to care about building on the current system and not losing ground to China. In general, conservatives and Republicans are more likely to believe this, although many continue to resist the kinds of reforms needed to boost opportunity and justice.

A growing share of Democrats (and DSA officials) reject this framing. They see America as tainted by the original sins of racism and capitalism, and believe that radical transformation is the only answer. If policymakers believe this, it follows that their patriotism will be diminished, and they will be less likely to support efforts to “make America strong and rich again.” They will instead seek to weaken America as it is currently structured, since a weakened America creates opportunities for their transformative agenda—overthrowing the “white patriarchy,” radically curbing capitalism and private property, and focusing on global rather than American challenges, such as climate change, poverty, and human rights.

I know what I believe. It is time for America to decide these “Three Decides” in favor of national power, innovation, growth, and the kind of national greatness Teddy Roosevelt stood for. U.S. national power is critical, and the nation is at risk of losing that power to the PRC. Economic growth and innovation are the wellspring of national power, and maximizing them requires smart government policies. The United States is a flawed, but still great nation, where continuous improvement is not only possible but the norm.

Time is running out, though. Unless men and women of integrity, reason, and patriotism band together to advance the right answers to these “Three Decides,” the odds of America effectively responding to the challenges described above are quite small. As such, it is long past time to get back to General Douglas MacArthur’s call to embrace “duty, honor, and country.”

One thing that struck me was the Harris campaign’s overarching focus on the consumption side of the economy rather than the production side. To be sure, there should be no question about Harris’s deep commitment to and concern for the most vulnerable among us. And that concern leads her to lay out a laundry list, much of it now standard in the Democratic playbook, of consumption-oriented and redistributive policies, including subsidies for housing, transit, college, and food; expanded social insurance; and, of course, breaking up companies to lower prices. Even her discussion of the need for more U.S. manufacturing was framed primarily in terms of helping disadvantaged people secure better jobs closer to home.

By now, it should be clear that the Democratic Party has quietly adopted one of the most consequential assumptions in modern politics: The economy runs on autopilot. It generates increased production more or less automatically. The government’s job is not to build it, strengthen it, or make it more competitive globally, but to redistribute what it generates and regulate how it behaves. Growth is assumed. Distribution is the question.

Democrats Once Cared About Production

But it wasn’t always this way. The Democratic Party has a long and proud tradition of championing economic growth and the production system while also advancing the interests of average working Americans.

In 1938, a group of Harvard and Tufts economics graduate students published a book titled An Economic Program for American Democracy. They wrote, “The essence of prosperity, whether it be privately or publicly induced, is an increasing volume of expenditure followed by an enlarged output of real goods and services.” FDR called the book “a bible of the New Dealers.”

JFK championed a tax credit for business investments in machinery and equipment and accelerated depreciation rules to spur capital investment. He also proposed across-the-board income tax cuts, arguing that lower rates would boost growth. James Tobin, a member of Kennedy’s Council of Economic Advisers, recalled that “growth was a good word, indeed the good word.”

Jimmy Carter led major deregulation of airlines, trucking, railroads, banking, and natural gas to spur competition and growth. He also signed a capital gains tax cut in 1978. And with America’s competitive position slipping relative to Japan, Carter launched a Domestic Policy Review on Industrial Innovation in 1978. The review concluded in 1979 with a series of Industrial Innovation Initiatives to increase knowledge transfer, strengthen the patent system, improve regulation to support innovation, and maintain a federal climate conducive to technological strength. It was one of the earlier explicit federal acknowledgments that U.S. industrial competitiveness was eroding.

Bill Clinton pushed deficit reduction to lower real interest rates and free up capital, signed a capital gains tax cut, and supported increased federal R&D funding to promote growth and competitiveness. Under the leadership of White House adviser Ira Magaziner, the Clinton administration also promoted the Internet as a growth engine.

President Obama supported increased R&D funding for the National Institutes of Health and the Department of Energy, provided ARPA-E’s first funding, and established the Advanced Manufacturing Partnership. He also pushed repeatedly to make the R&D tax credit permanent. And, of course, his administration launched the National Network for Manufacturing Innovation, based on an ITIF proposal.

I doubt any of these presidents could win a Democratic primary today with these positions. To see the change, consider the evolution of two leading Democratic economic policy thinkers.

In 1988, Robert Reich, who later served as Clinton’s secretary of labor, argued that “the only becoming-richer strategy is to invest in our future productivity.” But by 2020, in his book The System, he was counseling America’s leaders to “forget the standard economic goals of higher growth and greater efficiency. The issue is who benefits from more growth and efficiency.”

Gene Sperling, the first person to serve as director of the National Economic Council under two presidents—Bill Clinton and Barack Obama—underwent a similar conversion. When Sperling was director of economic policy for the Clinton campaign in 1992, he advocated a bold investment agenda to increase the economic growth rate. By 2005, he was arguing that “economic dignity should be seen as one of three defining progressive values underlying our policy agenda.” Growth, however, remained the main objective—until 2020, when he determined that economic dignity “should be the central organizing goal of economic policy” and that GDP should not be the “main end goal of economic policy.”

This shift from prioritizing production to ignoring it in favor of consumption and distribution was not limited to two former administration officials. It describes the trajectory of many Democratic elected officials and pundits.

How Growth Became Someone Else’s Problem

So what happened?

One reason is that the postwar neoclassical synthesis “solved” economic growth theoretically, essentially making growth look self-propelling. In this standard model, capital accumulates, labor and capital combine, and exogenous technological progress boosts productivity. Markets allocate resources. The economy expands. Government manages demand at the margins through fiscal and monetary policy. This framework became so deeply embedded in mainstream economics—and in the educated class that absorbed it—that it stopped being recognized as an assumption at all. Democrats absorbed this framework and built their politics on top of it. The pie gets made automatically. Government decides how it’s sliced. That becomes nearly the entire program, except for a nod to Keynesian stimulus when the economy enters a recession.

But while that helps explain the broader lack of a growth agenda in American politics, it cannot fully explain the Democrats’ radical shift toward consumption-side economics over the past decade. That shift stems partly from the left’s critique of neoliberal economics, which it rightly attacks for its excesses—tax cuts for the rich, the financialization of the economy, and opposition to higher minimum wages, among other things. But rather than adopt a new production-oriented growth framework, much of the left has rejected growth as a central goal altogether and defaulted to consumption economics.

Underpinning this turn away from production is the widely held belief that productivity gains no longer benefit workers.

It is a commonly accepted myth. Robert Reich argued, “Most people’s incomes haven’t risen for four decades,” and “corporate profits reached record levels.” In 2019, Nobel Prize–winning economist Joseph Stiglitz claimed, “The bottom 90 percent has basically seen their incomes stagnate.” Biden economic adviser Heather Boushey has written, “A rising tide no longer lifts all—or even most—boats.”

These assertions are treated as fact.

If it were true that economic growth no longer benefited most workers, it would indeed be a serious charge against production economics. But the categorical claim that most Americans’ incomes have not risen is dead wrong. It rests heavily on studies purporting to show a vast divergence between productivity growth and labor income growth.

These studies are flawed in several important ways. First, given the increased share of labor income consisting of nonwage compensation, including health care and retirement benefits, the more accurate measure is total compensation, not just wages. The Federal Reserve Bank of St. Louis found that, when total compensation was adjusted using personal consumption expenditures (PCE) measures of inflation, real compensation growth tracked productivity growth very closely from 1995 to 2006. The Congressional Budget Office has also found that real average household income rose substantially across the income distribution between 1979 and 2018.

Once Democrats bought into that, it made sense to abandon the production side of the economy. After all, more production just helped the rich. Of course, this was always wrong and always based on faulty analysis, as the CBO, ITIF, and many others have pointed out.

When the consumptionists need to put a patina of growth around their economic agenda, they claim that simply spending money on non-wealthy Americans spurs growth. No, it doesn’t. It primarily spurs consumption. During a recession, that additional spending may temporarily boost growth, but it is not a long-term growth strategy.

The Coalition Changed, Too

Policy shifts usually stem from changes in ideas and politics. The shift in the Democratic coalition also plays a role. As Michael Lind and Ruy Teixeira have documented extensively, the Democratic Party is no longer primarily a working-class party. Many working-class voters now support Donald Trump. It is increasingly the party of the credentialed professional-managerial class: academics, lawyers, nonprofit professionals, government administrators, social workers, health care bureaucrats, and so on.

This class has a distinctive relationship to the economy. Its members do not, by and large, make things. They generally do not work in industries that compete internationally. Their income flows from institutions, such as universities, hospitals, law firms, and government agencies, that are largely insulated from international competition and the production of physical goods. Many benefit quite directly from increased government spending.

So naturally, they don’t think about growth, productivity, and industrial capacity as urgent political priorities. Those priorities feel distant, or even threatening, associated with the corporations and developers they regulate rather than with the public goods they manage. Their material interests are served by redistribution, regulation, and the expansion of the administrative state. Not by a more dynamic production system.

Economic growth has become associated with the interests of those they regulate. Factories pollute. Developers displace. Corporations exploit. Growth has become a problem to be managed, regulated, and even reversed rather than a goal to be pursued. The very concept of national economic competitiveness has begun to sound vaguely right-wing, something that trades the interests of disadvantaged groups for corporate profits.

The Cost of Economic Autopilot

This has produced an intellectual tragedy that threatens America’s future. It has left the Democratic Party unable to articulate a serious affirmative vision for American economic strength. The costs are not abstract: A country that underinvests in innovation, capital equipment, infrastructure, workforce skills, and trade-exposed industries risks slower productivity and wage growth, greater import dependence, a weaker defense industrial base, and a diminished ability to compete with China. Say what you want about Trump; there’s plenty to say. But he at least says he wants America to have the strongest economy in the world. When was the last time you heard a Democratic leader say this?

After a long and noble tradition stretching from the New Deal through Obama, the party of national economic development became the party of government services and subsidies. Both have their place. But only one of them keeps the lights on.

The uncomfortable truth is this: The Hamiltonian tradition—using state power to build national productive capacity, invest in strategic industries, and compete seriously with rival powers—has been largely abandoned by the party that believes in active government. Alas, that tradition now has no natural political home. The Trump administration has also gutted a wide array of growth policies, further weakening America’s position in the contest that will define this century.

Democrats don’t have to choose between fairness and production. They need an agenda that treats investment and productivity as the foundation of broadly shared prosperity. The autopilot assumption was always intellectually lazy. It is now actively dangerous.

I guess I’m that jerk because I disagree with nearly everything in their report.

For the report’s authors, a pro-worker technology is one that makes human skills and expertise more valuable, while a pro-worker policy is one that steers innovation away from displacing workers or devaluing their existing skills. This is because they hate pain and because, with AI, “the pain will be magnified if this automation occurs rapidly.”

Under this logic, tractors, assembly lines, electronic telephone switches, automatic bowling pinsetters, and e-commerce are all pain-inducing technologies. Tech becomes suspect whenever it eliminates particular jobs or devalues specific skills.

And, of course, the authors repeat the standard bromides about technology and productivity: Income inequality has grown, wages have stagnated, and labor’s share of income has fallen. Data continue to show that treating automation as the principal cause of these developments is incorrect or exaggerated. Yet the authors warn that “AI will accelerate these worrisome trends.”

To be sure, no one ever said that losing one’s job is painless. I know it’s not: I lost mine when the Office of Technology Assessment (OTA) closed, and it was not high on my list of pleasurable experiences.

But as they say in training, no pain, no gain. The authors want the equivalent of getting stronger—in this case, richer—without the exertion of an actual workout.

The paper groups technologies into five broad categories: (1) labor-augmenting, (2) capital-augmenting, (3) automating, (4) expertise-leveling, and (5) new task-creating.

But surprise, surprise, these AI Luddites effectively reject four of the five groups, deeming the technologies they include potentially harmful to workers. Apparently, new task-creating tech is the only pure category, which the authors describe as “unambiguously pro-worker, meaning that it creates only winners.”

What? Where do they think productivity growth and higher living standards come from? A great deal comes not from creating new tasks but from making old tasks more labor-efficient. Their standard suggests we should not have developed tractors, which their framework would classify as a labor-augmenting technology, but instead should have given farmers a better tool for planting seeds by hand.

Of course, they would shudder at being accused of Luddism, so they go out of their way to say that the other four “bad” uses of technology are not “necessarily socially undesirable, but they pose additional labor market trade-offs.” You mean some tasks shifting from workers to machines, workers moving into other work, and higher per capita incomes as a result?

It’s kind of amazing that three scholars with PhDs could get it so wrong. But that is what maternalist groupthink produces: No one should ever lose a job. Worse, their framework largely treats displacement as the end of the story. Once a worker is laid off, the poor sap is evidently finished and headed straight for the UBI dole to survive.

The fact is, most displaced workers get new jobs. The most recent Displaced Workers Summary from the Bureau of Labor Statistics found that roughly 66 percent of workers displaced from jobs they had held for at least 3 years were reemployed. That rate rose to 74.5 percent for workers ages 25 to 54. And among those reemployed in full-time jobs, the majority earned as much or more than they had before. Sure, those numbers may not erase the costs of transition, but they demolish the idea that displacement means permanent exclusion from work.

But in the authors’ world, if an enterprise employs fewer workers, it is treated as a permanent disaster rather than transitional friction. In reality, technology-driven displacement is the economic equivalent of DOMS (delayed onset muscle soreness) after leg day: painful for workers and communities in the short term, but a temporary symptom of progress as the economy adapts and grows stronger.

So, the authors want AI technologies that “collaborate with workers, enabling them to (a) perform more-sophisticated tasks related to their jobs, (b) tackle new tasks, and (c) acquire new expertise.”

Then comes the wage argument. The report states: “Even if demand for cable installation soars as robotic automation lowers prices, electricians will not be needed to do this work anymore.” And so, the argument goes, cable installers’ expertise will be devalued and their wages may fall.

Wow. Let’s break that down:

1. Technology adoption must be evaluated from society’s perspective, not just from a single firm’s or worker’s perspective. If society can produce the same output with less labor, productivity rises. If we need fewer electricians to install the same amount of cable, those workers can do other work, increasing output and, over time, per capita GDP.

2. Labor markets and skills are not fixed. When demand for an occupation declines, a strange thing happens: Workers shift occupations and find jobs that use related skills.

3. Many occupational skills transfer relatively easily across industries.

Again, that does not mean technological disruption is painless. It means the proper response is to enhance workforce training and adjustment policies to help workers transition successfully—not to suppress productivity-enhancing technology.

But rather than accept the pain of layoffs (or even downsizing through attrition), the authors favor “machine capabilities [as] a force-multiplier for human expertise” over “using machines to automate human capabilities and hence make human expertise superfluous.”

That sounds reasonable until you spend a moment thinking about it. Their argument makes me wonder whether any of the three authors has ever worked a manual-labor job or one that is mind-numbingly boring. If they had, as I have, they would know how hard that work is, even harder than writing a dissertation.

And they would know how much better off many of us grunts would be if there were fewer such jobs. A University of Chicago analysis found particularly low levels of job satisfaction among waiters, laborers, hand packers and packagers, cashiers, food preparers, customer service representatives, and butchers, as well as low levels of general happiness among garage attendants, pressing machine operators, kitchen workers, and amusement and recreation staff.

Other studies have found low levels of satisfaction in similar manual, service, and clerical occupations, such as hotel and motel desk staff, mail clerks, insurance policy processing clerks, telemarketers, and aircraft cargo handling personnel. We do not need technology merely to collaborate with workers in these jobs. We need technology to do more of this work, allowing workers to move into work that offers greater autonomy, meaning, and satisfaction.

To be clear, that is entirely possible. Governments and companies around the world are implementing advanced technologies and automation tools across many of the industries listed above to raise productivity and living standards. For example, Japan’s Henn-na Hotel chain was the first in the world to staff hotels primarily with robots, and some restaurants in South Korea use robots to deliver food to tables.

Here is one candidate for automation: taxi and rideshare driving. A recent study of taxi drivers in Cameroon found that just over 73 percent had experienced low back pain—the most prevalent musculoskeletal disorder globally—during the previous year and nearly 66 percent reported job dissatisfaction. I know, you are supposed to say those jobs have dignity and provide opportunity. Of course they do. All jobs have dignity, and elites should not look down their Ivy League noses at people who do “mundane” jobs. But that does not mean that driving eight hours a day is pleasurable. I, for one, don’t know how Uber, Lyft, and taxi drivers do it.

What about the opportunities automation could create? If governments stopped prohibiting taxi and rideshare companies from deploying autonomous vehicles more broadly, fares could fall and capital investment could rise. That would create greater demand for workers who build and maintain autonomous systems, while consumers could spend their savings from lower fares on other goods and services that employ people. A win-win, unless you work at MIT.

So, let’s end the nonsense that says the economy’s goal is to prevent existing workers from ever losing their jobs. And let’s stop treating “pro-worker” as the decisive test. What about pro-growth, pro-consumer, or pro-American? A nation that suppresses labor-displacing technology will not protect its workers; it will simply lose investment, production, and jobs to countries that do not.

But the report comes right out and says it: A robot that installs cable is “not pro-worker” because fewer tasks are done by workers and more by capital. The authors should just go full Luddite, get rid of shovels, and require workers to use spoons, to paraphrase Milton Friedman.

To no one’s surprise, their policy agenda, if followed, would be a disaster: subjecting tech firms to stricter antitrust scrutiny, reshaping the tax code to limit incentives to invest in automation, and imposing new legal restrictions and compensation requirements on companies that use worker expertise to train AI systems. You get the idea. Protect the proletariat from the greedy, robot-deploying capitalists.

Maybe life in the rarefied world of job security through academic tenure makes universal job security seem plausible. Tenure for the masses! Here’s an idea: Let’s abolish academic tenure and promote automation so we can be sure our kids will have a much better life than ours.

Several jurisdictions have bizarrely decided that this is the thing to do. Just this week, Montgomery County, Maryland—a deeply blue suburb of Washington, D.C., where I live—took the enormously courageous step of approving an 18-month moratorium on new data centers. The measure is a “compromise” between an existing six-month pause and a proposed two-year ban.

Expedited Bill 19-26 imposes an 18-month ban on issuing new permits for data center construction and places strict limitations on large-scale data center development. The legislation takes effect immediately and applies to projects already in the pipeline.

Councilmember Evan Glass, chair of the Transportation and Environment Committee and lead sponsor of the bill, stated:

I’ve been working tirelessly to hit pause on data center development in Montgomery County so we can protect the Potomac River, prevent an exorbitant rise in electric bills, and chart a more sustainable path forward. This moratorium is a necessary step to give our community the time we need to make thoughtful, responsible decisions about our future and to ensure that economic growth never comes at the expense of our environment, our ratepayers, or the quality of life we value.

Councilmember Will Jawando, who introduced the measure calling for a two-year pause, does not reject the label of “democratic socialist” and recently won the Democratic primary for Montgomery County executive. He said:

Jurisdictions across the country are facing the same choice. You can chase corporate promises of profits that may never come, or you can listen to your residents and lead. We chose to lead.

First, you chose to pander. Second, “profits that may never come”? If you allow data centers and none are built, then no new profits or tax revenues materialize, and the county is in the same position as before. What is the downside, exactly?

The Montgomery County Council cited “robust public support” for the measure. Few written testimony submissions opposed the moratorium. And, surprise, surprise, environmental groups overwhelmingly supported some version of the ban, although many urged the County Council to adopt even stricter restrictions.

It’s popular to blame data centers for today’s societal worries. But the vast majority of the purported harms attributed to data centers are either manageable through existing regulation or entirely overblown.

Consider the Potomac River, which many environmental groups identified as a primary concern. Any discharge associated with a data center would already be subject to applicable federal and Maryland laws. Data centers are also becoming incredibly water-efficient as new technologies emerge that offer superior cooling with limited or zero water consumption. A blanket moratorium is an extraordinarily blunt substitute for evaluating the best state-led model of water governance for large industrial users.

And why pick on data centers? The Council not only allowed but actively promoted the creation of the Pinkney Innovation Complex for Science and Technology, which also uses electricity, consumes water, and produces wastewater. Apparently, that complex qualifies as a worthy venture while digital infrastructure powering critical 21st-century technologies does not.

The same inconsistency applies to electricity demand. If rising electricity consumption is inherently bad, why does the county continue to encourage and subsidize electric vehicle adoption? EVs require more electricity and grid capacity, too. Perhaps EV owners should pay a special tax for the additional energy generation their vehicles require. Better yet, given that there are roughly 50,000 EVs registered in Montgomery County, it’s clearly time to impose an 18-month moratorium on new EV purchases. I’ll be damned if I want my electric bill to go up!

To be clear, the evidence does not support the simplistic claim that data centers have caused higher electricity costs for consumers. National average retail electricity prices have tracked with general inflation since 2010, and wholesale prices are closely tied to fuel costs, especially natural gas, which powers about 40 percent of U.S. generation.

Moreover, Councilmember Glass, all the leading data center developers have made solid commitments to pay the marginal costs of the new electricity their facilities require so that those costs are NOT shifted onto local ratepayers. If the county is concerned about higher costs for residents, then it should hold developers to their commitments—not prohibit development altogether.

Even more preposterous is the county’s invocation of climate change as a reason to block data centers. First, if it believes it can solve climate change by stopping economic and technological growth, its leaders and resident activists are delusional. Global energy consumption will continue to rise, regardless of whether Montgomery County embraces degrowth.

Second, large technology companies are making massive investments in clean energy innovation and deployment, including advanced geothermal energy and small modular reactors. Those investments are especially critical given the Trump administration’s disastrous cuts to Department of Energy research and commercialization funding. These technologies cost hundreds of millions, if not billions, of dollars. If the federal government won’t adequately support them, few institutions besides Big Tech have the bank accounts, incentives, and commitment to addressing climate change needed to do so at scale.

So who opposed Bill 19-26? Organizations concerned about the county’s long-term economic competitiveness, workforce development, jobs, and high-growth sectors, including the Montgomery County Chamber of Commerce (MCCC), the International Brotherhood of Electrical Workers (IBEW) Local 26, the Maryland Tech Council, and the Greater Capital Area Association of REALTORS.

As many of those organizations noted, data centers generate substantial local tax revenue, a benefit supporters of the moratorium were either unaware of or ignored. For example, MCCC explained in its testimony:

Data centers provide significant and stable tax revenues, strengthen the property tax base through substantial capital investment, and support income tax revenues through both construction employment and long-term operational jobs. These benefits help fund schools, public safety, and essential infrastructure, while placing comparatively minimal demands on local services.

If three midsized data centers operated in Montgomery County and officials used the additional revenue to reduce residential taxes—perhaps property taxes, since I pay an arm and a leg for my modest bungalow—residential tax bills could decline by an estimated 2.3 percent.

Yet the Office of Management and Budget concluded that the moratorium will “not affect County revenues or expenditures” because it requires no county spending. Really, the ban will have no fiscal impact? What about the tax revenue the county will forgo by preventing projects from moving forward? Foregone revenue is a fiscal consequence, even if it doesn’t show up as a new line item in the budget.

The approved moratorium pauses Atmosphere Data Centers’ proposed $1.4 billion project in Dickerson, which the county was in the process of approving. According to Atmosphere, the Dickerson Data Center Campus would contribute roughly $758 million in Montgomery County tax revenue over 15 years. Alas, the county won’t see a penny of that for at least 18 months (and maybe ever, if the developer decides Montgomery County is not worth the trouble).

What is especially hilarious is that the same newsletter from Council President Fani-González discussing the recent data center action includes a section titled “Your Property Tax Questions, Answered.” Yeah, I have a question: Why not allow data centers and use the additional revenue to lower my exorbitant taxes?

Oh, and did I mention that Montgomery County lost more jobs in 2025 than any other county in Maryland? In its submission opposing Bill 19-26, IBEW Local 26 stated:

I ask the Council if they have any other ideas on growing the economy or providing private sector jobs that include healthcare benefits and defined pensions... These are the jobs of the 21st century, and I ask you to seek these well-paying jobs and not put a moratorium on them.

Good point. Is the Council working on any alternatives? Given the serious cuts to federal employment across the D.C. metro area and the possibility of further reductions, the county can no longer assume that job growth will remain on autopilot, as it largely did for decades. Nor can county officials continue acting as though the local business climate does not matter.

Virginia is certainly not thinking this way. While Montgomery County debates how long to ban the infrastructure underpinning today’s innovation economy, neighboring Northern Virginia is building a dominant position in it. Northern Virginia contains the country’s largest concentration of operating data centers, and the state leads the nation in planned facilities.

And if the ban is good for the county, why did the Montgomery County Economic Development Corporation (MCEDC) not weigh in? There is no mention of the measure on MCEDC’s website. Perhaps its leaders also realize that the moratorium will hurt efforts to attract business. It would be funny if it were not so tragic that one of the top four goals of MCEDC’s Strategic Plan is to “Elevate Montgomery County’s brand as a desirable place to live, work, and do business.”

Temporarily banning data center development will certainly affect Montgomery County’s brand, but probably not in the direction MCEDC intended. The decision will not only constrain the county’s participation in strategically important advanced industries that depend on data center infrastructure but also weaken its long-term economic competitiveness by deterring future private investment.

As the Greater Capital Area Association of REALTORS outlined in its testimony:

Montgomery County continues to face an unfavorable economic outlook… cancelling projects already moving forward is not good faith governance. It is a signal that Montgomery County continues to encourage business and development go elsewhere, leaving our residents and taxpayers with fewer county services and higher tax bills to show for it.

The developer behind the paused project reinforced that point. Atmosphere Data Centers’ submission to the Council put it bluntly:

Montgomery County has worked hard to position itself as a place where innovative industries can invest, create jobs, and contribute to the tax base. Repeated pauses and temporary restrictions send the opposite message. They suggest that even when a project follows the rules and participates in the public process, the rules may change before a decision is reached.

That is not the message Montgomery County should be sending to the business and investment community.

This aspect of the moratorium is incredibly damaging. It tells every prospective investor that satisfying the county’s established requirements may not be enough. Companies considering investments in laboratories, manufacturing facilities, energy projects, or other advanced industry infrastructure will notice.

But none of this seems to matter because anti-corporate, anti-growth ideologues, allied with selfish NIMBYs, are simply too powerful. If you are a degrowther, as many Montgomery County activists appear to be, then this ban on new data centers is a good thing. To them, economic stagnation is just an unfortunate side effect of a bigger, “more important” cause.

Don’t worry, I have a solution! For 18 months, Montgomery County residents should be banned from using AI. They want all the benefits while letting other communities bear the costs. (The perceived costs, that is. There are almost no costs of having a data center in your community, and the net benefits vastly outweigh any that might exist. But that’s not how NIMBY Luddites see it.)

I’m just kidding. As a resident, I cannot live without my AI assistant, which has become the most important nonperson in my life. It makes me better informed and makes my life so much easier. But that is precisely why long-term data center moratoriums are so ridiculous. AI services do not materialize from the ether; they all depend on physical infrastructure somewhere.

If Montgomery County were serious about supporting data center development to ensure that its residents’ data needs are met, it might impose a genuinely brief pause of several months. It should not require 18 months to determine what tax contributions, electricity commitments, environmental standards, siting rules, utility agreements, or community benefits developers must satisfy. Besides, if this were truly about “getting it right,” why did the Council pair the moratorium with strict limitations specifically targeting large data centers before completing the supposedly necessary analysis?

Of course, one deeply blue county won’t make or break the nation’s ability to prosper and compete in AI. But hundreds of counties adopting similar restrictions could. Local bans can add up to a de facto national constraint on the infrastructure necessary for technological leadership. Meanwhile, China is not pausing its digital infrastructure and advanced technology ambitions.

That’s why I’m proposing an 18-month moratorium on data center moratoriums.

U.S. federal law enforcement is increasingly concerned about anti-technology terrorism, understandably so, given the rise in violent threats against tech executives and AI companies. Some have unfortunately spilled into real-world incidents, including two attacks at Sam Altman’s home this April. And while anti-technology extremism does not always take Kaczynski’s violent form, the movement’s underlying ideology still poses a serious threat to the nation.

Kaczynski saw modern technology as the root of all evil. Only by returning to a simpler, quasi-Thoreauvian existence, he believed, would humans regain their freedom and dignity. He was unquestionably intelligent, but he also hated being told what to do, possibly reflecting oppositional defiant disorder. To Kaczynski, living in a technologically advanced society meant submitting to institutions, obligations, and rules that constrained his precious freedom.

Talk about a knucklehead. If you don’t like technology, retreat to the woods and eat berries. Do not murder people or wage a yearslong terror campaign, threatening further violence unless major newspapers publish your anti-technology manifesto, “Industrial Society and Its Future.” But Kaczynski could not settle for personal withdrawal; he demanded the destruction of the system.

His vision is becoming more widely held, generally without mass violence, although the growing severity of today’s anti-tech rhetoric indicates such violence could follow. Even when the manifesto appeared in 1995, numerous prominent intellectuals took Kaczynski’s ideas seriously. They condemned his violence, of course, but insisted that his arguments deserved serious consideration.

James Q. Wilson, an influential social scientist and former chairman of the Council of Academic Advisors at the American Enterprise Institute, wrote in a January 1998 New York Times op-ed that the manifesto was “a carefully reasoned, artfully written paper,” adding that, if it was the work of a madman, “then the writings of many political philosophers—Jean Jacques Rousseau, Tom Paine, Karl Marx—are scarcely more sane.” He was certainly right about Marx.

In 2000, Bill Joy, cofounder and then chief scientist of Sun Microsystems, quoted Kaczynski’s manifesto at length in his famous essay, “Why the Future Doesn’t Need Us.” While Joy did not endorse Kaczynski’s actions or broader program, he treated part of Kaczynski’s argument seriously enough to use it as the foundation for a warning about the potential risks of 21st-century technologies.

Then, in 2009, Kevin Kelly, the fame-seeking founding executive editor of Wired, published a post titled “The Unabomber Was Right.” You get the idea: The Unabomber’s vision had become radical chic. And that was only the beginning.

Today, we are witnessing a Kaczynski revival. Most decry the violence, but simultaneously embrace the supposed genius of his arguments. The emergence of AI has only intensified the phenomenon, which extends well beyond anonymous social media trolls. Commentators across platforms are increasingly willing to portray Kaczynski as a prophet who understood where technological progress would lead.

PC Magazine published an article titled “The Unabomber Was Right: How a Terrorist’s Warning Has Become Our Reality” in October 2025. In 2021, Tucker Carlson called the Unabomber a “bad person” but said he had written a “smart analysis.” YouTube videos circulate with titles like “The Unabomber Tried to Warn You This Would Happen.” In 2023, responding to the opening sentence of the manifesto, Elon Musk tweeted that Kaczynski “might not be wrong.”

TikTok creators have used trends and hashtags, including #TedPill, #TedK, and #TedKaczynski, to elevate the terrorist’s ideas and attract millions of views. An article analyzing Kaczynski’s popularity among these influencers explains: “To swallow the ‘Ted pill’ is to embrace the romance of a return to a pre-industrial, hunter-gatherer lifestyle… It offers a dystopian diagnosis of modern life, embracing a utopian fantasy of some prelapsarian state-of-nature.” (It is laughably ironic that people are using a culturally dominant, Chinese-owned social media platform to campaign for an anti-tech movement.)

More than 30 years after its publication, the manifesto remains an Amazon bestseller in the “Radical Political Thought” category. There is even a thriving online market for Unabomber merch, because nothing says “revolution against the industrial system” quite like ordering a Ted tchotchke to display alongside your mass-produced Che Guevara poster and “We Believe” yard sign.

One academic article states:

Several commentators have argued that Kaczynski’s reasoning is sound. Indeed, many of Kaczynski’s observations about technology and the environment have proven to be prescient. Accordingly, a new generation of followers have adopted his anti-technology philosophy. If Kaczynski was correct about technology and the environment, this might warrant a reevaluation of his socio-theoretical writings and reconsideration of his constructed persona as a mad genius.

To better understand what these people are legitimizing, consider the opening of Kaczynski’s manifesto:

The Industrial Revolution and its consequences have been a disaster for the human race. They have greatly increased the life-expectancy of those of us who live in ‘advanced’ countries, but they have destabilized society, have made life unfulfilling, have subjected human beings to indignities, have led to widespread psychological suffering.

I will not spend pages cataloging the wonders of technologically advanced societies or thanking my lucky stars that I was not born 100 years earlier. But consider the basics: vastly higher incomes, medical treatments that would have appeared miraculous to earlier generations, instantaneous access to enormous stores of information, the ability to travel almost anywhere in the world, and countless other improvements in material well-being.

The simplest rebuttal to Kaczynski is this: Who in their right mind would voluntarily return to the world below?

This romanticized nineteenth-century harvest scene may resemble the life Kaczynski wanted humanity to recover. To be sure, it looks pastoral enough. But the pre-industrial world was defined by arduous labor, economic vulnerability, and isolation. The illustration doesn’t show the grueling manual labor required from sunup to sundown simply to survive. No thank you.

Or how about this image?

Pre-industrial Europeans depended heavily on grain-based diets, leaving communities vulnerable to recurring harvest failures, famines, disease, and local mortality spikes. But hey, at least people supposedly enjoyed freedom and autonomy. Except, of course, that many did not. Millions lived as tenant farmers, servants, or agricultural laborers bound by rigid social hierarchies and economic necessity.

Technological and economic progress might not have eliminated human suffering, but it dramatically expanded humanity’s capacity to prevent famine, treat illness, transport food, communicate across distances, and survive environmental shocks.

Kaczynski nevertheless wanted to overthrow advanced technological society:

We therefore advocate a revolution against the industrial system. This revolution may or may not make use of violence; it may be sudden or it may be a relatively gradual process spanning a few decades. We can’t predict any of that. But we do outline in a very general way the measures that those who hate the industrial system should take in order to prepare the way for a revolution against that form of society. This is not to be a political revolution. Its object will be to overthrow not governments but the economic and technological basis of the present society.

So, smash the computers, machines, and tractors. Burn down the factories, laboratories, and infrastructure. And then, live free.

At the center of this “worldview” (if you can even call it that; a better term might be psychological disorder) is a delusional demand for autonomy: The individual must be liberated not merely from political oppression but from nearly every institution, technological system, social obligation, and constraint. Certain people on the right, such as Ayn Rand, appear to have suffered from a similar malady.

Kaczynski wrote: “But for most people it is through the power process—having a goal, making an autonomous effort and attaining the goal—that self-esteem, self-confidence and a sense of power are acquired.”

Industrial society, in his telling, reduces individuals to drones and deprives them of meaningful autonomy. One section of his screed is titled “Restriction of Freedom Is Unavoidable in Industrial Society.” Yes, Teddy, it is. I cannot drive 100 miles per hour down my neighborhood street. I cannot dump my trash on my neighbor’s lawn. I have to work. Ah, what a straitjacket.

And had Kaczynski formed any meaningful, lasting human relationships, he might have discovered that restrictions on individual freedom are unavoidable in families and communities too. I did not climb Mount Everest because I did not want to risk my children growing up without a father. That was a restriction on my freedom—and one I willingly accepted because mature adults balance autonomy against responsibility to others.

So, what the hell is the matter with the people now legitimizing “Unabomberism”?

In his remarkable book Double Lives, which examines covert Soviet operations to transform gullible Western intellectuals—dubbed “innocents”—into unwitting channels for Soviet propaganda, Stephen Koch writes: “It is quite true that once a fashionable opinion was properly launched, it would quite spontaneously develop and grow among the ranks of enlightened people.”

One Soviet operative reportedly called this ripple effect in cultural politics “rabbit breeding.” Today, we are breeding anti-AI rabbits.

Koch captures the underlying psychology exactly right:

They needed to believe. In order for this to happen, the apparatus had to seize on the most salient moral claims of the adversary culture from which almost all these people emerged, and make it theirs.

An increasing number of people today, including elites, embrace an adversary culture. Their identities are built around opposition to one or more central features of American life. In this case, the target is technological progress itself. Every technological advance is interpreted not as a tool that may be improved or deployed responsibly, but as another mechanism for constraining personal freedom.

Koch went on to observe that the net effect of Soviet facades (efforts to hide the true nature of Stalinism and Soviet communism) was to “bind Stalinism to the self-evident truths of a given adversary culture, and make that Stalinism feel indispensable to an enlightened life.”

Substitute Unabomberism for Stalinism—not as a claim of moral or historical equivalence, but as a description of how intellectual orthodoxies reproduce themselves—and one gets a reasonably accurate picture of the current dynamic. To live an enlightened life, one is expected to decry technology. Everyone else is doing it, after all, and no one wants to appear unfashionably optimistic about technological progress.

The Chinese Communist Party unquestionably has an interest in amplifying American social divisions and weakening public support for advanced technologies essential to U.S. economic strength and national security. While it’s too early to tell whether Beijing is spurring on the revival of Kaczynski’s ideology, as the Soviet Union once actively promoted communism in the United States, it’s clear that America is in a dangerous place.

Maybe we need new McCarthy hearings to root out the Unabomberists. (Just kidding…) But we certainly do need a more concerted effort to identify foreign attempts to spread anti-technology extremism in the United States. More importantly, we need more Americans willing to say that the emperor has no clothes. Thinking critically and independently about technology and its economic and societal impacts sometimes means rejecting the day’s fashionable opinions and conventional wisdom.

It might be easier to go along with the dominant narrative or nod quietly when people make absurd claims: We should oppose all data centers; AI will inevitably cause mass unemployment; social media is wholly destructive; autonomous systems deprive us of freedom; yada, yada, yada. But members of the non-adversary culture need to stand up and tell the anti-AI rabbits exactly what they are—enemies of progress and of the nation.

As I write on the first page of Technology Fears and Scapegoats:

Technological innovation is the most important factor determining not only America’s future, but the world’s… Only technology can deliver the necessary growth, productivity, and scale to create a world with higher wages, clean and inexpensive energy, advanced health care, 24/7 support for the elderly, enhanced education for the young, and so much more.

Who wouldn’t want this future? Well, as it turns out, a lot of people. The biggest barrier to achieving today’s technological imperative is the growing animus against an innovation-driven future. This animus can be seen in the many falsehoods that demonize advanced technology and the people and companies that bring it to market.

Unless these falsehoods are challenged, the West will struggle to restore the optimism and ambition required for a robust innovation ecosystem. That would make it easier for China to dominate the advanced industries that underpin economic power and national security in the 21st century.

Romanticizing a terrorist’s dream of dismantling industrial society is not a serious way to address concerns about new technology. And those who indiscriminately oppose technological development are not harmless nostalgists. Whether they understand it or not, their agenda would weaken economic growth, erode U.S. competitiveness, constrain military capabilities, and deny future generations the benefits of continued innovation.

Look, I get it. I would love to live in Hobbiton too. But Tolkien neglected to mention that such a life would require backbreaking labor and result in considerably shorter lives. The only way to achieve something resembling a real-world Hobbiton—a prosperous, peaceful community with abundant leisure and time for family, friendship, and food—is through vastly more technological innovation and automation, and the productivity gains they generate. That will give people more time and freedom without reducing them to impoverished peasants.

It is time to denounce Unabomberism for what it is: a profoundly dangerous and unserious ideology masquerading as enlightened concern for humanity.

Okay, sure. These efforts are a good start. But it’s still only the first inning of what will have to be a long ballgame if we don’t want to lose. Whether Washington will sustain a response equal to the challenge China poses remains an open question.

Congress has a short attention span. Too many lawmakers seem to think that because a few bills were passed and some tools were created, they can now move on to other matters. And while President Trump was tough on China in his first term, he has since softened his stance and now appears more interested in reaching a modus vivendi with Xi than in maintaining a long-term techno-economic strategy.

This would be the equivalent of the United States, facing the Soviet threat after the Korean War, passing a few bills, setting up a couple of new programs, and calling it a day. Thankfully, our leaders then did much more. They understood the challenge as generational, requiring persistent work, investment, and sacrifice.

Today, the danger of taking a timeout this early in the game is simple: It will give Xi even more time to dominate advanced industries globally.

So, what would convince me that Washington is taking the China challenge seriously? Not a sudden change of heart from think tanks and advocacy groups that pander to China or deny the severity of the threat. Given their entrenched interests, ideologies, and commitment to prior positions, that is not going to happen.

That said, it doesn’t have to happen. Those groups do not need to change their minds for decisionmakers to step up to the plate and start hitting singles. The following policy options, many of which are included in ITIF’s report on how to slow the PRC’s progress toward global dominance, would help put the United States on base.

1. Reform Section 337 of the Tariff Act of 1930 to protect U.S. firms by making it easier to keep goods and services from Chinese companies systematically supported by unfair trade practices out of the U.S. market for up to 10 years. This is a potentially powerful tool, but its current structure is not as effective as it should be. Congress could do this tomorrow with no significant fiscal impact, which should make it one of the rarest things in Washington: a no-brainer.

2. Enact serious permitting and environmental regulatory reform in ways that are less damaging to competitiveness. It’s clear to all but the most die-hard environmentalists that many current rules are a significant barrier to the industrial construction the nation needs if it is not going to deindustrialize further. Ideally, Congress would repeal the National Environmental Policy Act (NEPA), but that is a big lift. At a minimum, it should pass current bipartisan permitting reform bills to make the process less onerous, time-consuming, and costly.

3. Build an “inspection wall” against counterfeit and pirated imports from China. China accounts for 87 percent of counterfeit goods seized each year, with the combined value estimated at $30 billion to $40 billion. Yet too much still enters the U.S. market, undercutting American jobs, eroding public confidence, funding Chinese competitors, and supporting China’s economic growth.

4. Increase criminal penalties for U.S. IP theft by foreign adversaries. The punishment should be strong enough to serve as a real deterrent. Economic and technological espionage is not uncommon, including cases involving Chinese nationals working in the United States who then return to China. Increasing both penalties and the likelihood that state-backed actors are prosecuted is one attainable step.

5. Strengthen the Committee on Foreign Investment in the United States (CFIUS) screening and oversight. Expanding CFIUS’s review authority to cover joint ventures, minority investments, and technology-licensing agreements with Chinese entities would help limit “false flagging,” where Chinese firms obscure their ownership or strategic intent in the U.S. economy to gain access to the U.S. market, talent, IP, and subsidies.

6. Expand the R&D tax credit, which is anemic compared with China’s and the credits offered by many other nations. To better incentivize private-sector R&D investment in the United States and help prevent further losses in advanced industry market share, Congress should, at minimum, double the regular R&D tax credit from 20 to 40 percent and boost the Alternative Simplified Credit rate from 14 to 28 percent.

7. Pass a third “Morrill Act” to fundamentally restructure land grant universities around technical fields aligned with national power industry needs. The original goal of land grants was to provide practical, industrial-focused education to working-class students, helping advance agriculture, engineering, and industry. To support more education and research in key areas critical to national power today, a modern version should incentivize those institutions to return to that mission.

8. Increase the share of NSF research funding going to engineering, currently 8.2 percent, to at least 20 percent of new funding. Engineering research is central to the advances in industrial production needed to compete with China, and the imbalance between federal support for basic science and engineering should be reduced. If necessary, Congress should pay for a larger engineering portfolio by reducing NSF funding for the social sciences and geosciences.

9. Restrict the U.S.-China Science and Technology (S&T) Agreement and require disclosure by U.S. researchers collaborating with Chinese institutions in national power industry fields. To be sure, there may be areas where cooperation is reciprocal and does not advance key technologies, but Washington should limit the S&T Agreement to areas that do not support China’s national economic power industries. Endangered species research sharing, yes; EV research sharing, no.

10. Give the Department of Commerce authority to designate up to 100 projects per year as critical to national economic power industries. The United States will lose the techno-economic and trade war with China if Washington continues giving equal weight to potato chips and computer chips. This designation would qualify certain projects in strategically important industries for streamlined regulatory approval, limited legal challenges, and reduced compliance burdens.

Obviously, the 10 steps described above are only a fraction of the policy and programmatic changes needed if the United States is to stop losing global market share in advanced industries critical to national power. Additional actions that Washington and Western allies should take to prevent long-term decline as China seeks global hegemony are outlined in ITIF’s ongoing National Power Industry Series, which provides a comprehensive policy agenda and detailed recommendations across key domains.

Fundamental policy transformation grounded in a new bipartisan consensus may be difficult, but it is what this moment requires. If I had to bet, I would wager that Washington will remain mired in gridlock while China runs up the score. I hope I am wrong.

Again, not to sound like an old man, but when I got my Ph.D. way back in the day, the expectation, if not the mandate, was that you did everything possible to be objective. Even my professors at UNC, who I knew were on the liberal side of the spectrum, still insisted on critical thinking and objectivity. Perhaps that was because, at the time, getting ahead in academia required it. I don’t know.

What I do know is that I see less and less of this. And I think the underlying reason is that an increasing share of academics seem to chafe at the narrow confines of teaching, writing peer-reviewed journal articles, and presenting at academic conferences with only a handful of people in the audience.

As in so many other areas of American life where norms and constraints have broken down, too much of academia is now fame-seeking. You can put a jargony spin on it, calling it “faculty thought leadership” or “domain expertise,” but the whole point is to gain lots of social media followers, be invited to exclusive forums, get on the high-paying speaking circuit, consult for big companies, write bestselling popular books, and even appear on 60 Minutes.

In a world of hypercompetition, academics have to do that, and their universities love it. That’s the definition of “making it” as an academic today.

The way this happens is not by saying, “Well, this particular thing might have this particular effect, but we’re not sure, and there are going to be multiple different paths.” Rather, it is to polemize, disregarding facts, evidence, and data that contradict your polemic, and to hammer the same point home over and over again so that you become known for it. Similar to what Nobel Prize-winning MIT professor Daron Acemoglu has done. That becomes your brand. And brand is everything.

Let me give you an example. Over a decade ago, I asked MIT’s Andrew McAfee to debate me on jobs and technology. I knew one point he would likely make, since he had already done so in a prior publication, was that even manufacturing employment in China declined significantly from 1995 to 2000, just like it did in the United States. Therefore, according to McAfee, U.S. losses had everything to do with automation and nothing to do with trade. (By the way, this remains the conventional wisdom and has been a major barrier to the creation of a national manufacturing strategy.)

But I was ready for that argument. During the debate, I cited a BLS study that showed conclusively that the drop in China’s total manufacturing employment was a statistical artifact due to changes in definition and coverage. So although the official data indicated that China lost many manufacturing jobs, a closer look revealed clear statistical anomalies. Once the reclassification and measurement distortions in the 1990s data were accounted for, the evidence showed that Chinese manufacturing employment continued to increase.

But lo and behold, five months after the debate, with the publication of his book with Erik Brynjolfsson, The Second Machine Age, McAfee made the same claim (page 184). Did they dispute the BLS? Did they just overlook my critique? Perhaps, but let’s be real: The counterevidence put a monkey wrench into their core argument that technology was killing jobs worldwide, so it was easier to ignore it.

I get how disconcerting it can be when you see data, evidence, and argumentation that challenge your own view of the world. I remember 25 years ago, when Robert Gordon wrote an article claiming that productivity did not benefit American workers. That was a big shock to me because I had devoted much of my professional career to figuring out and advancing policies to boost productivity. And if it turned out that productivity had no effect on workers’ well-being, what was the point of all my work?

You may say that I’m delusional, but I read Gordon’s work in great detail and found its argument unconvincing. Still, I took it seriously and sought out other studies and data on the issue.

But it appears we see this less and less among academics and scholars today. I saw a recent email exchange between two scholars about the nature of capitalism and its benefits to workers (I will keep the names private, as this was shared with me via private email). What struck me was that one of them seemed to have drunk the Kool-Aid of the conventional center-left view on many of these issues, and he seemed utterly uninterested in digging deeper to see whether these mainstream views were actually true, well-supported, or even advantageous.

For instance, he cited a study on the growth of income inequality since 1980 to show that any reforms that do not focus on significant redistribution and limitations on high-income and corporate gains would be meaningless. But he could have gone to the same source, the St. Louis Fed, to look at the growth in median wages. It turns out that if we had limited income inequality to its 1980 levels, median income would go up about $4,800. But St. Louis Fed data on the growth of median wages show that median wages grew by $22,160. That is not chump change. So why reject the current system and seek to overthrow it?

He claimed that only companies are getting the gains but cited no evidence. Academics would typically look at BEA profit rates to see whether this was true. ITIF did so in 2020 and found that nonfinancial domestic profits had remained unchanged over the last 40 years. This finding should give pause to someone who says that the entire neoliberal system is corrupt. But almost no one bothers to look at that data because it gets in the way of the established narrative.

Not to mention, he blithely accepted the notion that industrial concentration has gone up and that this is a key factor in what ails us (unfortunately, as have so many other scholars). But here again, almost no one actually looks at the data. The latest Census Bureau data show virtually no increase in concentration over the last 20 years. Inconvenient facts get in the way of the narrative that has to be pushed: neoliberalism is corrupt, it needs to be radically reshaped, and the focus should be principally on redistribution.

And I suppose no good critique of the economy today would omit the notion that workers are being immiserated while elites reap all the gains. For God’s sake, please do a little research. And don’t fall for the Economic Policy Institute/labor-left narrative that intentionally shows that productivity doesn’t benefit wages. It’s been proven wrong, or at least vastly exaggerated, by CBO, Stephen Rose, and others. But to paraphrase Al Gore, this reality is an inconvenient truth if you want to advance an anti-capitalist, social democratic, redistributionist agenda.

Finally, the email had to say that “left to its own devices, capitalism leads to inequality” and “the concentration and inequality that are weakening democracy.” To the first part, please provide some evidence and logic for that claim. Because, left to its own devices, as long as there is sufficient antitrust enforcement, competition, by definition, limits companies’ ability to earn supernormal profits, at least outside of a few industries driven by massive technological innovation for short periods of time.

As to the weakening of democracy, a much more commonsense explanation is the radical shift on both sides of the aisle over the last 20 years to the point where common ground is virtually impossible to achieve. And so, each side wants to rig the system, including by distorting the truth, to prevent the evil other side from gaining ascendancy.

By the way, just so you don’t think I am some kind of Ayn Rand worshipper, I absolutely support a higher minimum wage, higher taxes on the rich, and reining in financial capitalism. What I don’t support is moving to an anti-growth, EU-style, social democratic system.

Oh, and here’s one bonus narrative academics love to go along with: the AI jobs myth. The elite class has bought into the lump-of-labor fallacy that AI will lead to fewer jobs, which will lead to reduced labor demand and lower wages. To say that this is now the dominant view is a vast understatement. Almost everyone in this space makes the completely illogical argument that AI-driven productivity will lead to vast joblessness and therefore lower wages.

Nothing could be further from the truth. Of course, there is nothing wrong with saying that AI could lead to job dislocation. It most certainly will, and government should prepare for that. But to then ignore the fact that historically job displacement has not lowered wages or unemployment, and to ignore the second-order effects of productivity on prices, demand, and new job creation, is not being the kind of academic that I was trained to be.

I could go on and on with many, many more examples of intellectual areas where fame-seeking academics and their hangers-on have largely focused on advancing a narrative that fits their story. But I’ll stop for now.

I don’t think there’s any way to really change this, because it is emblematic of the society we live in. One that’s divided into enemy camps, and where individual incentives for fame and fortune have been allowed to run roughshod over more small-c conservative values and expectations of restraint and objectivity.

Why would we expect academics to be any different? The way to get fame and fortune in this space is to have a narrative that you stick to, even if the facts don’t back it up. And if you’re not in the lucky few who can have fame and fortune, you glom on to the narrative because you know professional advancement depends on going along with the dominant view.

Nor do I expect or even believe that interest groups, including left-wing advocacy groups, should suddenly start striving for objectivity. Like all political actors, they’re going to use information in ways that support their advocacy. I don’t have a problem with that because most people in Washington understand that advocates will present information biased toward their interests. But what they don’t expect is for academics to be part of that apparatus. And that’s what’s changed today.

A quick side note: I do expect journalists, though, to have a higher standard. You may ask when I fell off the turnip truck. I know I’m living in the past when I say that journalists at least used to make some attempt to be objective on these issues. It saddens me to admit those days are long gone, at least for the most part.

So maybe all we can hope for is for users of academic information, particularly policymakers, to understand that the days of objectivity are over. Most of the information they’re going to get, at least in this subject area, is going to be deeply influenced by bias and ideology. With any luck, policymakers will recognize that and do the work academics increasingly avoid: seeking some level of truth. One can only dream.

Pope Leo XIV writes:

Leo XIII’s Encyclical Rerum Novarum constitutes a milestone in the development of the Church’s social teaching. The document places the dignity of work and of workers at the forefront of its reflection; affirms the right to a fair wage for oneself and one’s family; recognizes that persons have a fundamental value that takes precedence over capital and profit…

It presents fair wages as the concrete means of verifying the justness of the entire socioeconomic system because they reveal whether the worker is treated as a person or merely as a cost of production. Work is not considered simply as a problem to be dealt with or a means of generating income, but a fundamental good for the person, a principle of economic activity and the key to the entire societal question.

This is a wonderful aspiration, and one that AI-driven productivity might eventually achieve, perhaps in 50 to 100 years. But throughout human history, including now, work has had to be a means of generating the income necessary to buy needed goods and services, not a means of uplifting the spirit.

Without work, there is no output. Without output, there is widespread immiseration. There was no choice. A society of worker-owned cooperatives would have produced outcomes no different from, and possibly worse than, those of a capitalist system.

The encyclical goes on to say:

Through work, human beings bring their freedom, creativity and capacity for cooperation into play, contributing to the cultural and moral elevation of society. In light of this, the various kinds of job insecurity, fragmented career paths and automation must not be evaluated solely in terms of efficiency, but in relation to the dignity of the worker, the right to sufficient remuneration and the genuine possibility of participating in society.

But the reality is that there are many less-than-fully satisfying jobs workers have to do because, without them, society wouldn’t function. Garbage collection is a tough, backbreaking job. But thankfully, we have workers willing to perform this critical task in exchange for pay. The development of AI-guided autonomous garbage trucks is a way to relieve that burden. To be sure, it would require garbage collectors to find new employment, but in their new jobs, their working conditions would likely be safer and their quality of life would likely improve.

The encyclical addresses a fair wage. Is a wage of 40 cents an hour with only a 4 percent rate of profit fairer than a wage of $40 an hour with an 8 percent profit rate? If so, why? Wages were low 100 years ago, not because of the selfishness of capital, but because of the paucity of technology and the resulting low productivity.

It’s one thing to talk about boosting the minimum wage—something Democrats should have done when they controlled the White House and both chambers of Congress. But it’s very different to believe that if the minimum wage were $40 an hour, this would translate into that income in inflation-adjusted dollars. It would not.

Related to this is the view in social capitalism that companies should not be focused on profits or productivity. Pope Leo XIV writes that while many of the historical conditions described by Leo XIII have changed, “at least two insights remain highly relevant today: the primacy of human labor over any mindset focused solely on finance or productivity.”

I agree that over-financialization is a problem. But productivity and profits are not. Without productivity growth, we would all be paupers and peasants. And without profits, companies would not take the risks needed to innovate and boost productivity and wages. We don’t live in a zero-sum world with the capitalists pitted against the proletariat.

Further, the encyclical echoes left-wing dependency theory:

With his Encyclical Sollicitudo Rei Socialis, marking the twentieth anniversary of Populorum Progressio, John Paul II reexamined the scourge of underdevelopment. He acknowledged the failure of numerous attempts to accelerate the economic development of poor peoples and to assist them in the process of industrialization, noting the persistent and indeed widening gap between the world’s North and South. He also denounced the economic, financial and commercial mechanisms that, managed by the strongest economies, structurally favor their own interests while stifling weaker economies, and he asked that they be subjected to serious ethical, not just technical, scrutiny.

But this reflects a fundamentally flawed version of dependency theory, and for AI, it implies particular policies: no software IP protection and limits on the use of AI to boost productivity in low-income nations. The first would slow global innovation. The second would help keep poor countries poor.

It also reflects the view that income inequality is rampant:

This perspective needs to become part of a broader view of global dynamics. While the world’s wealth has grown in absolute terms, it is increasingly concentrated in fewer hands, widening inequalities both within and between countries. “There are a few who have too much, and too many who have little, that is the logic of today.”

The reality is that the global Gini coefficient has declined, not risen, over the last few decades.

Additionally, the encyclical mirrors the dominant social capitalist view that higher living standards are not the most important solution to many problems, including health care, poverty, and national budget deficits. Rather, redistribution is.

The Pope writes:

Benedict XVI reiterated that economic activity cannot claim to solve social problems simply through the expansion of a commercial mentality, but must be ordered toward the common good, for which the political community bears its own irreplaceable responsibility.

To be sure, economic growth is not enough. But without it, efforts toward the common good will be much harder to achieve. That makes the encyclical’s lack of focus on technology and profit-driven economic growth even more troubling, given its assertion that “it is not enough to extol individual freedom or private enterprise if we then allow a multitude of people to continue living without decent work, protections or access to basic necessities.”

Poverty, especially in low-income countries, is not the result of the rich getting too much. It’s because too little is being produced.

Perhaps the most obvious way in which the encyclical moves from a needed call for a more human world to specific, doctrine-inspired policies is its treatment of intellectual property. The document states:

Today, among the goods that are universally intended for everyone, we must also include new forms of property, such as patents, algorithms, digital platforms, technological infrastructure and data. In a context where the wealth of nations depends increasingly on knowledge and technology, when these goods remain concentrated in the hands of a few, without adequate forms of sharing and access, a new imbalance is created that contradicts the universal destination of goods. In turn, it widens the gap between the included and the excluded, between those who can participate in the digital revolution and those who remain on the margins.

Certainly, there should be robust debates around intellectual property and how to strike the right balance between the incentives to innovate that IP provides and the immediate use of technologies that weak IP enables.

But the encyclical doesn’t do that. It simply reproduces the social capitalist view that IP should be eliminated so that the masses can get cheap or free drugs, software, and content now. However, without the ability IP provides to monetize investment, there would be fewer new drugs, software, and content in the future.

We see the same social capitalist view with respect to data:

Like the natural environment, the “digital ecosystem” can be preserved or exploited, shared or monopolized. Solidarity demands that decisions regarding data, algorithms, platforms and artificial intelligence take into account not only the immediate benefit for a few, but also the impact on all peoples and on future generations.

Making all data open would mean a less robust digital ecosystem and the end of free digital services, especially in developing nations. Users in poorer countries are being subsidized by users in richer countries when it comes to free Internet access, because lower average incomes mean those markets generate less advertising revenue. In effect, removing the ability to monetize data would limit revenue for Internet platforms and similar companies.

In addition, Pope Leo XIV does not seem to notice the intellectual contradictions in the document. On the one hand, it wants digital platforms to combat hate and misinformation, but on the other, it wants to reduce their “enormous power.” Which is it?

And of course, who defines misinformation? The state, to support its own interests? Certain politically inclined groups with clear biases, like the Southern Poverty Law Center?

Another contradiction is that the encyclical claims companies seek profits above all else, yet it also asserts that these very same companies seek to exclude certain groups. It says, “Justice demands that we prevent the emergence of new forms of exclusion and deprivation of freedoms: individuals and peoples hindered or denied access to basic technologies.” But if companies are only interested in profits, why would they deny sales to anyone?

Furthermore, the encyclical, like social capitalist views generally, damns AI for a host of problems that are not unique to it and that are, for the most part, already regulated, including “invasive surveillance and social groups penalized by opaque algorithms that perpetuate prejudice and discrimination.”

Companies selling AI services have massive incentives not to discriminate. Why sell an insurance algorithm that misprices risk? And in many AI use cases, including hiring, lending, credit scoring, and insurance, laws already exist that prohibit discrimination. AI doesn’t change that.

Like virtually all who embrace social capitalism, this encyclical gets technology and employment wrong, succumbing not only to the lump-of-labor fallacy but also to the preference for short-term protection against long-term progress.

The document asserts:

the convergence of automation, robotics and AI is rapidly transforming the very structure of work. It is said that this will bring great improvements for everyone. In reality, however, the “new ways” of working are not necessarily better, for “while AI promises to boost productivity by taking over mundane tasks, it frequently forces workers to adapt to the speed and demands of machines, rather than machines being designed to support those who work. As a result, contrary to the advertised benefits of AI, current approaches to technology can paradoxically de-skill workers, subject them to automated surveillance and relegate them to rigid and repetitive tasks. The need to keep up with the pace of technology can erode workers’ sense of agency and stifle the innovative abilities they are expected to bring to their work.” Precisely in order to avoid this drift, it is necessary to design systems that are centered on the human person and not solely on performance.

It goes on to claim that because of the so-called “fourth industrial revolution”:

this concern is even more acute, as innovation is often pursued solely for reducing costs and increasing profits... Yet, the protection of employment opportunities and the irreplaceable role of the individual must remain the general rule. The pursuit of greater profits cannot justify choices that systematically sacrifice jobs, because the human person is an end, not a means, and the economic order must remain subordinate to human dignity and the common good.

So, does that mean it was not humane to develop the tractor to boost agricultural automation? Or the electromechanical telephone switch to replace operators? Or self-service gas stations to replace gas jockeys? Productivity means reducing costs. That means reducing prices. And that means helping consumers.

To be sure, if for some reason AI were to create a lumpenproletariat, that would be cause for concern and action. But as I have written until my fingers bleed, there is no logic behind that claim. Global per capita incomes could go up by 500 percent, and people would not run out of things to buy.

On top of that, let’s say we cut the workweek to 15 hours. We are now talking about a 1,500 percent increase in global productivity, a far cry above the long-term average of 3 percent a year.

And of course, the encyclical embraces a social capitalist view that government should step in to ensure that no one ever loses their job because of AI. The Pope writes:

At this time of transition, it is not enough to react only when jobs disappear; we must oversee the transformation in advance. One viable path is, first of all, to establish social criteria for innovation. Here, every introduction of automation and AI should be accompanied by verifiable measures to protect the employment, retraining and participation of workers. In this way, technology will be oriented toward freeing up human time and capabilities, rather than producing exclusion.

If AI must protect employment, then by definition, productivity growth will be significantly limited. We didn’t get elevator productivity by making it easier for elevator operators to open and close doors. We got it by innovating self-service elevators. The reality is that if automation can’t free up human time, achieving higher living standards will be almost impossible.

The encyclical rightly points to the need for “proactive policies that make continuous training and professional transitions accessible to all, ensuring that the cost of adaptation does not fall solely on individuals.” It further states that “the benefits of innovation must be paired with investments in skills, infrastructure and essential services to ensure that technology does not widen the gap between those who have and those who have not.”

Yes, policymakers should focus on better worker training and transition assistance, as well as on investing more in skills and infrastructure. The document also advocates for:

measures to ensure equity: taxation, social protection and industrial policies must correct the imbalances created by the concentration of wealth and power. Indeed, these criteria do not constitute a curb on innovation; instead they make it civilized and humane.

Again, yes, that is generally true. Much can and should be done to ensure a fairer and more just world. And rather than posture and pontificate against AI, AI opponents should push for a world-class worker adjustment and dislocation system, as ITIF has laid out. But that is very different from tying down AI “Gulliver-like,” as the encyclical calls for.

The problem is that this logic quickly moves from helping workers adjust to slowing AI itself. The encyclical urges “rigorous evaluation and even, at times, a slower pace in adopting AI,” saying that this “does not mean opposing progress; instead, it is an exercise of responsible care for the human family.”

It goes on to assert: “What is needed is a more active political involvement that is capable of slowing things down when everything is accelerating, and of protecting the opportunities for communities still to be able to participate and ask questions.”

While it might not mean opposing progress, that will be the effect.

One rationale offered for this slower approach is environmental. Here again, the encyclical reflects the social capitalist view of the environment, claiming degradation is caused by capitalism and consumerism:

Broadening our perspective to the use of AI in society, we see that it is now embedded in decision-making processes across many sectors and at multiple levels: in communication, management and control. The gains in efficiency and the potential to improve certain services are clear, yet rapidly and uncritically adopting them exposes us to a range of risks, including the tendency to overlook the environmental impact.

Current AI systems require enormous amounts of energy and water, significantly influencing carbon dioxide emissions, and place heavy demands on natural resources. As their complexity increases, especially in the case of large language models, the need for computing power and storage capacity grows too, which requires an extensive network of machines, cables, data centers and energy-intensive infrastructure. For this reason, it is essential to develop more sustainable technological solutions that reduce environmental impact and help protect our common home.

But why single out AI companies? Electricity demand is rising rapidly worldwide (without AI) as companies and consumers switch from fossil fuels to electricity. Why are they not called out for being environmental scofflaws? Also, the encyclical fails to note that it is AI and data center companies leading clean energy innovation and deployment, especially as fiscally constrained governments have cut their support.

Continuing to echo the dominant social capitalism doctrine, the encyclical treats algorithmic responsibility as another rationale for intervention:

Indeed, entrusting an algorithm in practice with the power to select who is worthy or not, without anyone bearing responsibility for that judgment, is to hand over the task of redefining the boundaries of human possibilities.

To be clear, any organization that uses AI is ultimately legally responsible for harms or errors. It is the organization that will be sued. And if it wants to, in turn, sue the company that provided it with AI tools, it is welcome to do so.

The document also channels the same disdain for large companies and concentrated industries as the social capitalist view does:

The principles of Social Doctrine offer a framework for understanding this new reality. In a world where data, computational resources and regulatory influence remain in the hands of a few, to speak of the common good means exposing this new form of epistemic, economic and political asymmetry and naming the new monopolies of AI.

The reality for over a century is that most highly capital-intensive and innovative industries are characterized by competitive oligopolies, not Adam Smithian competition. Any attempt to change that will lead to lower living standards and reduced competitiveness.

Try telling any AI company CEO that their company enjoys a cozy monopoly, and they will look at you like you are crazy. The truth is that they all face the risk of Schumpeterian creative destruction, and that is what keeps them relentlessly focused on innovation to serve customer needs.

Taken together, these concerns lead the Pope beyond a “proceed with caution” warning. The encyclical doesn’t just call for slowing down AI development; it calls “to disarm” it:

Disarming AI means freeing it from the mentality of “armed” competition, which today is not limited simply to the military context, but is also an economic and cognitive phenomenon. This entails a race for ever more powerful algorithms and larger datasets, driven by the desire to secure geopolitical or commercial dominance. To disarm means discrediting the assumption that technical power automatically confers the right to govern. To disarm does not mean rejecting technology, but preventing it from dominating humanity.

It means freeing technology from monopolistic control and opening it to discussion and debate, therefore making it human-friendly and restoring it to the plurality of human cultures and ways of life. Our task today is not only ethical or technical. It is ecological in the deepest sense, for it concerns a new dimension of our common home. AI is already an environment in which we are immersed, as well as a force with which we must engage. For this reason, merely regulating it is insufficient; it must be disarmed, welcoming and accessible.

This is akin to saying that in the face of the threat of a globally aggressive Soviet Union, the West should have disarmed. Global disarmament might have been good, but it was not possible. The Soviets never would have agreed. Today is no different.

The free world is caught in a critical AI competition with China, and if the CCP wins, it would have enormous negative implications for Western freedom. To the extent there are issues around LLM safety, the two superpowers can and should cooperate, something President Xi and President Trump touched on during their May 2026 summit. But the last thing the CCP will do is “disarm” and slow its AI development.

The encyclical is on much firmer ground when it turns to certain currents of thought that “interpret progress as surpassing the human condition.” Perhaps the best part of the document is the Pope’s worry about transhumanism and posthumanism. He writes:

These perspectives form the ideological background present in some centers of technological power and occupy the collective imagination in a simplified form, especially in the media and on social networks. They tend to foster enthusiasm for new technologies through a futuristic vision of an “enhanced human being” or “human-machine hybrid.”

Pope Leo XIV is right. The Silicon Valley tech bros, with all their hype about the “Singularity” and ASI (artificial superintelligence), reject fundamental aspects of being human. And he is correct to call them out. They do more harm than good by scaring the bejesus out of many people. But even in Silicon Valley, these voices are a minority and should be usefully ignored—just don’t watch their TED Talks or follow them on X.

Yet even here, the encyclical goes too far by blurring the line between rejecting transhumanism and supporting innovation that reduces suffering. It states: “Our relationship with life seems to be in crisis today. Everything that appears as a “limit” — incapacity, illness, old age, suffering, vulnerability — tends to be seen primarily as a defect to be corrected, rather than as a reality.”

Does the Pope really believe that illness is an inherent part of being a child of God? Clearly, this can’t be the case, given the suffering that diseases like cancer and Alzheimer’s impose on people. Supporting medical innovation to cure illness is very different from supporting radical life extension.

It’s still early on the S-curve of AI innovation, and hopefully, the social capitalist techno-Lilliputians will not be able to tie down the AI Gulliver. But documents like the encyclical make that more likely.

Citing the Second Vatican Council, Pope Leo XIV writes:

the Church is not afraid to encounter human knowledge. Indeed, the word of God provides reliable standards for establishing paths of justice and opening ways of reconciliation and peace among peoples. When it comes to applying these standards to the complex situations of our time, the contributions of philosophy and of the human and social sciences is essential.

The only problem is that the social sciences are not sciences in the sense that physics and chemistry are. Especially in the last two decades, they have become ideologically determined doctrines, as a significant share of scholars now see their jobs, to use Marxian terms, as changing the world rather than understanding it.

As such, the encyclical reads less like careful analysis shaped by policy humility—the idea that any assessment of problems should be open to a variety of possible policy solutions, ideally guided by expert analysis and logic rather than emotion and ideology—than like a theological reflection of the doctrine of social capitalism (also known as progressive capitalism, inclusive capitalism, stakeholder capitalism, or Polanyian liberalism). This is perhaps not surprising because social capitalism has now, for all intents and purposes, replaced neoliberalism, at least among most center-left elites in the West. Social capitalism is now the default starting point for all conversations and policy discussions.

This matters because once a doctrine becomes the de facto reference point, real debates are over. Just as neoliberalism was a tight intellectual straitjacket that limited certain ideas and concepts from even being considered, such as tariffs, higher taxes, regulated markets, and a higher minimum wage, social capitalism today exerts the same, often unconscious constraints.

That means that with regard to most techno-economic issues, the core consensus has already been reached, and the only point up for debate is the mechanics of implementation—e.g., should we adopt universal basic income or just reduce taxes on “working people”? Of course, that has been the goal of progressives for at least the last two decades: Change the frame so that they dominate the conversation and their solutions are the only ones seen as acceptable.

The key problem is that the doctrine of social capitalism will lead to actions and policies that weaken the West vis-à-vis China while limiting the innovation and productivity growth needed. Indeed, in many ways, this is its goal, as it is grounded in an animus toward growth, technology-driven creative destruction, international economic competition, and large business.

To be sure, neoliberalism was not without its faults. But social capitalism may be worse. Moreover, as I have written, assuming they are binary options is a false, tribal choice. But rather than embracing the doctrine of national developmentalism or “innovation economics,” which offer superior ways to address the challenge of neoliberalism without undermining innovation, competitiveness, and productivity, the left has rejected any and all considerations of those alternatives in favor of the social capitalism religion.

This is evident in the encyclical, which reflects the social capitalism doctrine and, as such, embraces a kind of capitalism that is very different from what we have now, at least in the United States. (Europe has already fully embraced social capitalism.)

The encyclical comes down in favor of at least six key components of social capitalism.

1. Dependency theory: This holds that low-income nations are low-income not because of domestic failures, such as corruption, poor institutions, bad business climates, or opposition to technology and creative destruction, but because of the oppression, or at least selfishness, of rich nations. The overlords of the North have kept the victims in the South down. This is why the encyclical argues that the way to improve living standards in developing nations is for the North to give them more resources. Indeed, the encyclical states that a key reason low-income nations remain poor is because of “economic, financial and commercial mechanisms that, managed by the strongest economies, structurally favor their own interests while stifling weaker economies.”

   But if this theory is correct, why did South Korea, a country that had the same per capita income as Afghanistan in the 1950s, grow to equal America’s per capita income in the early 2000s? Did the North forget to stifle South Korea? No, of course not. The Korean political economy desperately wanted growth. As Joe Studwell points out in How Asia Works, institutions and culture matter, not oppression from the haves in the North.

2. Equity: Social capitalism sees growth as either problematic because it destroys the environment or inconsequential because workers don’t benefit from it. And so, the task for business and government is to put equity and fairness first. The Pope writes, “we can diligently contribute to every initiative that builds a more just world.” But does the Pope really prefer India, a country with a Gini coefficient almost half that of America’s? This is not meant to be a frivolous question, but it does suggest that if the goal is to support humans as children of God, then a nation with low income but greater equality is, by definition, inferior and less humane than a nation with a broad middle class coupled with a small share of highly wealthy people.

3. Technology neutrality: A concept from the field of Science, Technology, and Society, this holds that technologies are not de facto good. Rather, all new technologies must be shaped by society so they do not become harmful. Without that shaping, including through regulation and even bans, the negatives will significantly outweigh the positives.

   This sounds both logical and appealing, but history shows it to be largely wrong. Technological determinism driven by consumer welfare is the prevailing pattern. For example, once the internal combustion engine was developed, cars and suburbs were inevitable. Once biotech was developed, life-saving, but sometimes expensive, drugs were inevitable. Once the Internet and Web 2.0 emerged, social media was inevitable. All technologies have pluses and minuses, but if a non-military technology reaches the marketplace, by definition, its benefits significantly outweigh the costs.

4. Marxian alienation theory: This holds that because of the organization of capitalist economies, too many workers, if not most, are alienated from their true selves because they must serve their selfish capitalist masters. But the issue is not capitalism: Soviet workers were also alienated, in fact, even more so. The issue is that technology has not evolved enough to allow workers to have high incomes with few working hours, something AI can move us toward if society embraces it instead of shackling it. Yet the encyclical criticizes the current system for capitalist-generated alienation, suggesting that heavy regulation and anti-corporate policies are in order.

5. Lump-of-labor fallacy: This holds that once a job is eliminated by technology, it is gone for good, and workers are unemployed for long periods, if not forever. A corollary to this is the widely held belief that the only good process technology is one that complements labor, not one that replaces it. Logic, history, and economic analysis show that this is simply wrong. Yet the encyclical, like almost all work today on AI and employment, takes this fallacy for granted and endorses, like most social capitalists, slowing AI down.

6. Predistribution: This is the idea that it’s not enough for governments to work toward greater fairness through policies like social spending, progressive income taxes, and other taxes; policy should intervene directly in firm and technology development to reduce or even eliminate pre-tax and pre-transfer inequality. While the encyclical rightly points to the need for policy efforts to reduce inequality, such as higher taxes on the wealthy, it is clear that this alone is not enough. Policy must intervene in the production system. Of course, that comes at the cost of innovation and productivity.

With this encyclical, a message heard around the world in tens of thousands of news stories, the 30-year effort to overthrow neoliberalism is now virtually complete. The intellectual and political project of most elites in Europe, America, and the Commonwealth nations has been to fundamentally change the economy and the way policy is conceived. Through relentless attacks, most of them based on fallacies and distortions of evidence, these elites—academics, journalists, think tank scholars, and elected officials—have succeeded in destroying neoliberalism. Only the dedicated Hayekian right now offers a full-throated defense of it. And rather than embrace a pro-innovation, pro-growth, pro-business national developmentalism as the required alternative to a failed neoliberalism, they have established a dramatically different alternative, one that the Pope’s encyclical validates.

At its core, the Pope’s encyclical is channeling Hungarian social scientist Karl Polanyi, who argued in his 1944 book The Great Transformation that markets are socially constructed and must be re-embedded in social relations rather than allowed to become self-regulating. Polanyi argued that the self-regulating market of the 19th century was not a natural evolution but a deliberate political construction. And it was inherently unstable because it treated land, labor, and money as commodities. Labor is human beings. Land is nature. Money is a social institution. Treating them as pure commodities destroys the social fabric.

This maps directly onto today’s debate about AI and work: Labor being reduced to a fungible input optimized for machine compatibility is exactly the kind of commodification Polanyi was describing. The encyclical’s language about workers losing control, work speeding up, and rigid repetitive tasks reflects this orientation.

Pope Leo frames the overarching task as whether to “construct a new Tower of Babel or to build the city in which God and humanity dwell together.” Articulated this way, it’s an easy choice. The frame happens to be faulty. But still, in his view, unregulated AI will lead to the former.

As the Pope notes, his encyclical follows a long tradition, not just in Catholicism but in Protestant denominations as well, of the “Social Doctrine of the Church.” The idea was that Christianity should be concerned not just with spiritual and individual salvation but with changing the world to make it more just and humane. The Pope writes, “Today, the Social Doctrine of the Church is a legacy of wisdom, where we find principles for thought, criteria for discernment and judgment, and concrete guidelines for action.”

To be sure, the Social Doctrine was a force for good, as it directed needed attention to real challenges emerging from industrialization in the late 1800s that needed business and government responses. But it went far beyond calling out the harms and need for change to specific policy choices, where those choices were informed not only by the goals of the Doctrine but also by its biases. This was particularly true when it sought to engage directly in public policymaking choices grounded in an equity formulation, rather than a growth-with-equity formulation.

The encyclical follows in that tradition, especially because “In recent years, it has become increasingly evident how rapidly and profoundly digitalization, artificial intelligence (AI) and robotics are transforming our world.”

On the plus side, the encyclical does not indulge in reflexive, anti-technology Luddism:

Technology should not be considered, in itself, as a force antagonistic to humanity. On the contrary, it has formed part of our history since the beginning as “a profoundly human reality, linked to the autonomy and freedom of man.”

But rather than accept that virtually all non-military technologies that are commercialized are positive—why else would people buy them?—the encyclical channels the society-and-technology frame, which holds that:

each phase of progress has also revealed the ambiguity of tools that can cause harm when not oriented toward the good. Today, however, we find ourselves facing a new situation. The power and prevalence of emerging technologies are interwoven into the fabric of daily life, shaping decision-making processes and deeply affecting the collective imagination.

In other words, without significant societal and government involvement in the development of AI, it will do more harm than good, a view the EU has held for almost a decade. That is why the Pope writes: “It is necessary to establish adequate regulatory tools capable of upholding justice and curbing the distorting effects of technological power. Nevertheless, the issue is not limited to regulation.”

To be clear, I am not positing a neoliberal alternative. For example, AI safety and explainability are important factors. But these are best achieved not by slowing down AI but by boosting funding for safety research and working with leading AI companies to ensure certain aspects are limited, such as the ability to create a bioweapon.

One reason Pope Leo argues for much more intrusive involvement is because he believes power over technology lies in the hands of a few powerful companies and individuals:

As Pope Francis warned, we must realistically ask ourselves who holds this power today and how they use it: “It must also be recognized that nuclear energy, biotechnology, information technology, knowledge of our own DNA, and many other abilities which we have acquired… have given those with the knowledge, and especially the economic resources to use them, an impressive dominance over the whole of humanity and the entire world.”…

Today, however, the main drivers of development are private, often transnational, parties that are endowed with resources and the capacity to intervene that surpass those of many Governments. Technological power thus takes on an unprecedented, predominantly “private” aspect, which makes it even more challenging to discern, govern and direct such power toward the common good.

At best, this is an exaggeration. If AI and other large technology companies are so powerful, why have the EU and other nations ignored their opposition and passed laws such as the Digital Markets Act, the AI Act, and other similar restrictions? Why have many U.S. states passed laws that tech companies opposed? Why have data center buildouts slowed in the face of public opposition?

The tech industry, including AI, is no different from any other industry. When governments want to regulate it, they do. In fact, it’s less powerful than most industries. Anyone who follows business lobbying in Washington knows that the tech industry spends relatively little, particularly relative to its size, compared with other, longer-established industries like financial services, pharmaceuticals, and even real estate agents.

The idea that technology will be bad unless guided by the wisdom of the masses leads to the social capitalist prescription of government guiding technology:

crucial questions impose themselves on our conscience and can no longer be avoided: Where are we going? Toward what goal do we wish to orient ourselves? What direction should we choose as a people and as a human community?

How about this: We just enable AI innovation and get all the amazing innovation and productivity benefits? No, that is a bad idea according to social capitalists. AI must be constrained, controlled, and constricted. A key argument they make is that if only governments had regulated social media in its infancy, we wouldn’t have the problems we do today. But what regulation would they have liked to see? A law forbidding certain kinds of speech, which would usually focus on conservative speech that many social capitalists find abhorrent?

To be sure, if there were speech controls on social media, they would reduce some kinds of objectionable speech, but they would come at the cost of one of the core components of human flourishing—the ability to speak one’s mind, even when the powerful don’t like it. We’d all end up living in the UK, where people are jailed for posts that are subjectively deemed to be “grossly offensive.”

The encyclical goes on to assert that:

Technology has the power to heal, connect, educate and protect our common home; but it can also divide, exclude and generate new forms of injustice. In the abstract, technology in and of itself is not a solution to humanity’s problems, just as it is not inherently evil. In practice, however, technology is never neutral, because it takes on the characteristics of those who devise, finance, regulate and use it. Therefore, the primary choice is not between a “yes” or “no” to technology, but rather between constructing Babel or rebuilding Jerusalem; between a power that claims to dominate the heavens and a people who work together in the presence of God to rebuild the walls of fraternal coexistence.

This is straight from the social capitalist view of technology. But it’s not right. We have always relied on consumers to make decisions about most technologies. And where there are externalities, such as pollution, discrimination, or safety hazards, government, along with the legal system (tort law, for example), provides remedies. But at least in the U.S. tradition, it doesn’t try to slow down innovation.

And so, we get to the real critique in the encyclical, which states that unfettered capitalism and its “idolatry of profit that sacrifices the weak, a uniformity that neutralizes differences, and the pretense that a single language — even a digital one — can translate everything, including the mystery of the person, into data and performance” are the real problem.

Let’s start with the idolatry of profit. How would society work if all enterprises, large and small, lost money? We would all be poorer, and there would be no future investment. So, the problem is not profits; it’s putting in place needed protections that companies must follow. Car companies make profits, but they have to design cars in ways that improve safety and reduce environmental impact. Besides, if profits are now idolized, then why are profits in the United States today no higher than they were 60 years ago, an era of more regulated capitalism?

The risk of socially directed technology is who gets to call the shots. At least in regulatory capitalism, companies design products they think consumers want to buy, and government, through legislative and administrative processes guided by law, puts up guardrails where needed.

But social capitalism wants the entire process to be driven by “the people.” Indeed, the Pope writes:

We should not be intimidated by tensions or differences because they can become creative forces when guided by shared responsibility… Indeed, this is the possibility of building together, of transforming diversity into a resource and of making listening and dialogue the common ground upon which to cultivate justice and fraternity.

While this sounds ideal, it is far from the real world. In that world, many participants in the AI debate do not have a shared responsibility. They want a radically different kind of society, as we have seen with politicians like New York Mayor Zohran Mamdani and Senator Bernie Sanders of Vermont. There is no dialogue or common ground, only camps seeking to crush their opponents through any means possible. Not to mention adversarial nations that have no interest in a shared humanity unless it is one governed by their own anti-freedom ideologies.

A governance system shaped by pure democracy, rather than republican democracy, would likely lead to lowest common denominator solutions. What if one segment of society is more organized than the others, perhaps because a bunch of guilt-ridden rich people and foundations provide massive resources to them? Is the answer they advocate for the right one simply because it was purportedly bottom-up? If it is, then welcome to a world where AI is taxed, no more data centers are built, and it’s against the law to lay workers off. That is not a world that puts humans first. It puts anti-technology, anti-business advocates first.

The encyclical goes on:

Within this shared task, Christians discover their unique role of guiding actions toward God so that, in his light, pluralism does not dissipate into disorder, but instead, through the practice of synodality, it becomes the space in which humanity rediscovers its solid foundations and its final end.

But what exactly should be done to achieve that goal? For the Church to prescribe not just overall goals but specific outcomes and policies, as the practitioners of the Social Gospel did in the late 1800s, is to risk adopting policies that seem to provide grace but do the opposite.

We see this in the statement:

when the dignity of our brothers and sisters is violated, when politics fails to address the tragedies of humanity, when the economy turns against the person or science oversteps the limits of its competence, the Church — together with other Christian denominations and believers of other religions — must make her voice heard, not in order to dominate, but to promote communion.

How has the economy turned against the person? How have functioning states failed when it comes to AI? How has science overstepped the limits of its competence? These are normative claims that serve to justify social control of technology.

I will continue the discussion next week in Part II, with a particular focus on how the encyclical addresses AI and workers.

Less hunger, cleaner water, better health care, more infrastructure, and other goals on the UN’s list can all be made possible by higher productivity. Clean water requires money. So do health care, education, energy, broadband, and highways. Any country can have these things if it can pay for them; countries can only get the money to pay for them through higher productivity.

But unsurprisingly, labor productivity in many poor and low-income countries remains low. Senegal’s productivity is just above $6 per hour. Honduras’s is roughly $8. Compare that with almost $82 in the United States and about $100 in Singapore. That’s why the most important development goal should be helping low-income countries increase productivity so they can generate the wealth needed to address national challenges.

Yet higher productivity is not one of the UN’s 17 goals. The closest is Goal 8, “Decent Work and Economic Growth.” Even there, productivity is treated as an afterthought rather than a core imperative. The goal focuses on full employment, reduced labor inequality, equitable pay, safe working environments, and improved financial services—not productivity.

Many of the goals are actually at odds with higher productivity. The goal of more clean energy is likely to lower, not raise, living standards if renewable energy continues to cost a nation more to produce than energy from fossil fuels.

Goal 12 presents a similar problem. It calls on countries to move toward more “sustainable consumption and production patterns,” which is a euphemism for consuming less. By this measure, poorer countries have already achieved the goal. And if they want kids to play with “ethical and sustainable” soccer balls, as the UN apparently thinks is important enough to merchandise, they will probably end up paying more.

The same is true of Goal 13: “Take urgent action to combat climate change and its impacts.” Urgent climate action with long-term impacts almost always costs money.

Even the UN’s social goals would be served by higher productivity. There is a clear causal relationship between national per capita productivity and women’s rights, just as there is between higher productivity and environmental protection.

So, given that productivity is the foundation for many of the UN’s Sustainable Development Goals, why did it not make the list? The answer is simple: Many of the policy elites who dominate the economic development conversation, especially those claiming to speak for the “Global South,” have long abandoned growth in favor of redistribution, now with a “green” cherry on top.

Case in point, in 2013, the UN secretary-general named economist Abhijit Banerjee, among others, as a key adviser to help develop the SDGs. This is the same economist who could write the following, with a straight face, about how to improve the lives of people in poor countries: “A higher GDP may be one way in which this [a better life] can be given to the poor, but it is only one of the ways, and there is no presumption that it is always the best one.” Surely, you are kidding me (and stop calling me Shirley).

No surprise, WEF founder Klaus Schwab had to be part of this anti-growth chorus. In his 2021 book, he writes, “We never should have made GDP growth the singular focus of policymaking. Alas, that is where we are today. GDP growth is our key measurement and has permanently slowed.” For him, the focus on growth was a “systemic design error in the Western economic development model,” and “we will have to deal with a whole basket of other problems we created while pursuing higher growth.” You mean problems like well-funded schools, cancer treatments, reliable energy, widespread car ownership, and more?

And this gets to the key factor: Grounded in the nonsense of Marxist dependency theory, UN leadership and staff too often seem to believe that growth is a plot to keep the Global South down, either by increasing inequality or by limiting developing countries’ growth. Indeed, the United Nations Conference on Trade and Development (UNCTAD) has asserted, “Every spurt of progress has been associated with sharper inequality between countries.”

This is why so many of UNCTAD’s policy proposals, such as requiring developed nations to share intellectual property and technology free of charge, are redistributionist in nature. It is also why many growth rejecters, of whom the UN has no shortage, point to Gandhi’s famous aphorism: “Live simply, so that others may simply live.” Well, at least we would have equal incomes—all of them low.

To be clear, growth in advanced economies does not come at the expense of lower-income nations; it often makes growth easier for the latter. After all, many major innovations that improve living standards globally, from modern medicines and higher-yield agricultural technologies to telecommunications networks, were developed because wealthy nations had the resources to invest in research, development, and commercialization.

Higher productivity ultimately generates the resources needed to improve health outcomes, expand educational opportunities, build resilient infrastructure, and reduce inequality. So if the UN were serious about ending poverty and improving living standards worldwide, it would make productivity growth the organizing principle of its agenda.

To actually “transform our world,” the UN should replace its 17 Sustainable Development Goals with one: boost productivity. Everything else follows from there.

Weak Arguments

Before I provide two real reasons why manufacturing matters, let me rebut five common but ultimately weak arguments.

1. “Manufacturing delivers good jobs.”

In reality, there are not that many jobs in manufacturing. U.S. manufacturing accounts for just 7.5 percent of total jobs. From 2016 to 2025, manufacturing job creation was just 2 percent of total net new jobs. Even if the United States eliminated the manufacturing trade deficit, it would maybe boost manufacturing to 10 or 11 percent of total jobs.

2. “Manufacturing jobs are good jobs.”

Are manufacturing jobs good jobs? They used to be. In the early 2000s, there was a wage premium of 3 percent for manufacturing production jobs. But according to the Federal Reserve Bank, that premium has disappeared, with wages for manufacturing production workers 5 percent below those of the rest of the private sector.

To be fair, the wage premium is more significant in rural areas, as is manufacturing’s share of total employment, suggesting that one reason to support more manufacturing is as a rural development tool. But given that rural manufacturing jobs declined between 2019 and 2023, it’s not clear how much a revived manufacturing sector would do for rural economies.

3. “Manufacturing is critical to productivity.”

Sure, manufacturing has, on average, higher value-added per worker than the rest of the U.S. economy. But if, by some miracle, America could boost manufacturing productivity twice as fast as economy-wide productivity (assuming 2 percent productivity growth for the economy and 4 percent for manufacturing), this would boost overall productivity growth by just 2.3 percent after 10 years. And even that estimate is extremely optimistic, given that manufacturing productivity actually fell from 2011 to 2019.

4. “Manufacturing is critical to innovation.”

It is. Even with the vast increase in R&D in America’s information sector (think Google, Amazon, Meta, Microsoft, etc.), the majority of U.S. R&D still occurs in manufacturing. R&D is critical because it drives innovation (e.g., the introduction of new goods and services into the market), which, by definition, improves our lives. Moreover, much has been written, correctly in my view, about the importance of the tight geographical linkage in many sectors between manufacturing, R&D, and innovation.

But here’s the rebuttal: Why can’t the United States just buy the innovative products and services it needs from other nations? If Germany produces better robots or Taiwan makes better computer chips, America can just buy them. As long as global innovation is robust, the United States is fine.

5. “Manufacturing has one of the highest economic multipliers of any U.S. industry.”

Bureau of Economic Analysis input-output tables show roughly $1.40 to $1.90 in additional output per dollar of manufacturing output, versus much lower multipliers for most other sectors of the American economy. Having said that, unless the economy is in a deep recession and policymakers want to expand demand, who cares? If the economy is close to full employment, which it usually is, multipliers are largely irrelevant.

Actual Reasons

Okay, that gets us to the two real reasons why manufacturing is important.

1. The trade deficit.

Manufacturing accounts for roughly 60 percent of U.S. goods-and-services exports despite being roughly 11 percent of GDP. Without manufacturing, the trade deficit would skyrocket even more and, in contrast to what the Adam Posens of the world might have us believe, that is not a free lunch. A large trade deficit makes Americans better off in the short run because U.S. consumption exceeds production. But unless other nations are willing to subsidize American overconsumption forever, this cannot continue indefinitely.

At some point, the value of the dollar will have to fall significantly so that Americans consume less than they produce and export the difference, thereby lowering real living standards because the United States will need to import less, consume less, and export more. Putting off that day of reckoning will only make things worse. The longer America delays that adjustment, the more debt and economic burden it passes on to future generations.

Which leads to… drum roll, please… the second and BIG reason…

2. China.

Without major structural change in U.S. policy, akin to the strategy America implemented at the beginning of the Cold War, U.S. national economic power industries, most of them manufacturing-based, will weaken significantly or die. In turn, this will diminish the U.S. defense industrial base and give China techno-economic leverage over America across a broad range of sectors, not just rare earth minerals.

The United States simply cannot afford to live in a world where it is dependent on China for jets, drugs, chips, machine tools, autos, and more. Dependence of that kind would give Beijing enormous leverage and hollow out the U.S. defense industrial base.

That means America needs a manufacturing competitiveness strategy. Not as social policy to create jobs. Not as environmental policy to create “green” products. Not as growth policy to boost productivity. But as national techno-economic security policy.

As Trump considers next steps, he should judge every proposed action and agreement in the techno-economic and trade space on one question: Does it strengthen or weaken China’s national power industries, especially vis-à-vis the United States?

If you’re wondering why, here’s the short version:

• America is at grave risk of losing leadership to China in a critical set of advanced, traded-sector industries that underpin economic strength, military capability, and geopolitical power in the 21st century—what ITIF calls “national power industries.”

• This is not normal economic competition between market economies. Competition in these industries is win-lose, and market share translates into production scale, innovation capacity, supply chain control, talent concentration, and geopolitical leverage. When China gains global market share, the United States and allied nations do not simply lose sales; they lose industrial capability.

• China’s push to dominate national power industries is not accidental. It is a carefully orchestrated, multi-decade strategic campaign backed by massive subsidies, protected domestic markets, cheap capital, forced technology transfer, and state-directed investment. The goal is to displace Western techno-economic power and reshape the global order under CCP leadership.

• How Washington responds will determine whether the U.S. maintains the advanced production and innovation capabilities necessary to be a leading global power. Incrementalism will not be enough. Nor will maintaining America’s 50-year-old system of financial capitalism.

• Domestic industrial policy alone is insufficient. Even under the best circumstances, the United States cannot fully replicate the scale, coordination, political system, or subsidy capacity behind China’s techno-economic-trade mercantilist model.

That means America must not only strengthen its own national power industries but also take steps to slow China’s progress toward global techno-economic dominance.

Which brings us back to the talks and potential agreements emerging from the Trump administration’s meetings in Beijing.

Any proposed deal in the techno-economic and trade space should be evaluated primarily through one lens: Does it help or hinder the rise of Chinese firms in industries critical to national power?

According to every major media outlet, topics on Trump and Xi’s agenda included tariffs, AI, market access for American firms in China, Taiwan and Iran, rare earths, fentanyl, and technology restrictions. Notably, Beijing hopes to extend the current trade truce and secure relief from U.S. sanctions and tech restrictions. There has also been speculation that Trump and his advisers are seeking a major investment from China, discussing a potential arrangement that would allow China to invest as much as $1 trillion in the United States to build factories and other industrial facilities.

From a short-term political or economic perspective, some of these proposals may appear attractive. But many risk advancing China’s long-term techno-economic position in ways fundamentally misaligned with U.S. strategic interests.

To start, Washington should stop treating advanced tech restrictions as ordinary bargaining chips in trade negotiations. Export controls on certain technologies exist because these industries are foundational to military power, industrial leadership, and geopolitical influence. Relieving pressure on China’s technological upgrading in exchange for temporary trade concessions or commodity purchases risks sacrificing future strategic leverage for short-term optics. The United States is not going to lose its soybean industry. But it could lose its biotech and IT equipment industries.

Similarly, large-scale Chinese investment in U.S. manufacturing should not automatically be viewed as a strategic win simply because it creates jobs or factories on American soil. Chinese investment in the United States is good for China’s strategic interests, not America’s. It lets Chinese firms destroy U.S. firms inside the tariff wall, while siphoning off U.S. intellectual property and gaining access to American industrial know-how. Trump should avoid the siren song of short-term gains and ribbon-cutting. And U.S. investment in China is good for China because it spreads knowledge and boosts local supply chains. That is why the supposed “Board of Investment” should be viewed with caution.

The same logic applies to rare earths and critical minerals. While stabilizing access to Chinese-controlled supply chains may reduce near-term disruptions, dependence itself is part of Beijing’s leverage strategy. The long-term objective should not be cheaper dependence on China, but resilient allied production capacity outside Chinese control. Toward that end, if Xi does not back away from weaponizing rare earths, Trump should threaten to impose controls on the strategic goods China depends on.

Even “market access” requires more scrutiny than Washington traditionally applies. Policies that benefit specific multinational corporations do not necessarily strengthen America’s national power industries. Too often, U.S. firms gain access to the Chinese market while China simultaneously gains technology, industrial scale, supply chain leverage, and strategic positioning that further erodes America’s competitive position. Certainly, a commitment to buy more Boeing jets, if real, is welcome. But let’s be clear: China is only doing this because it previously weaponized a Boeing boycott, which the feckless Europeans were all too happy to capitalize on through increased Airbus sales.

This is ultimately the core problem with how much of Washington still approaches economic relations with China. The United States continues to treat trade negotiations largely as transactional exercises focused on purchases, tariffs, market access, and quarterly economic outcomes. China treats them as instruments of sustained national strategy. Of course, Xi does not have to run for re-election. U.S. policymakers do, with stakes particularly high as midterm elections approach. But those in the administration still can and should act as statesmen focused on protecting America’s long-term security and national interests.

Beijing understands that strong national power industries are now central to geopolitical power. Washington increasingly says the same, but too often still negotiates as though it is competing with a normal market economy rather than a state-directed rival pursuing global techno-economic and industrial dominance.

For the last 20 years, the Chinese strategy has been to stall, buying time to avoid conflict now as they build and get stronger, and as the West gets weaker. This is what Muhammad Ali once famously called the “rope-a-dope” strategy. Trump should approach every proposal coming out of Beijing with that reality in mind.

The question is not whether a deal produces favorable headlines, temporary export gains, or short-term political wins. The question is whether it strengthens or weakens America’s long-term position in the industries that will determine global power in the decades ahead. And based on the initial reports, at least, Trump appears to have left Beijing having mostly failed on that front.

Since the end of World War II, the United States has seen itself in a role like St. Paul’s as it has taken up the mission of spreading the creed, not just of democracy and freedom, but also of free trade, which most policy elites view as a key enabler of the former. Indeed, after it became the global hegemon, the idea of free trade was something that the United States pushed with its proposal for the International Trade Organization (which Congress rejected because of concerns over sovereignty). It then championed the expansion of trade through multiple GATT rounds, and then in 1995, the creation of the World Trade Organization.

Soon after, the People’s Republic of China began to press for membership, because it knew that it needed foreign direct investment as the first phase of its development plan, and it understood that the certainty the WTO gave foreign investors was critical.

And so, the Clinton administration came to promote China’s accession, successfully urging Congress to pass permanent normal trade relations (PNTR) with China in 2000, which helped pave the way for China to join the WTO in 2001

But why did policymakers agree to all this, especially given that China was, and is, a socialist economy? The easy answer is corporate lobbying, as companies wanted access to Chinese markets for sales and production. But while lobbying matters, U.S. policymakers are not completely subject to lobbying forces. The reality is that most of the supporters of PNTR actually believed it to be in U.S. interests.

Why was that?

One reason was that they took the PRC’s promises seriously. U.S. officials treated these commitments as if would any other commitments from a democratic, rule-of-law nation. This is why the U.S. Trade Representative could write that the agreement would prohibit technology-transfer requirements on foreign companies seeking to do business in China; make the PRC radically reduce its rampant intellectual property theft; identify and reduce industrial subsidies; and treat state-owned enterprises no differently than foreign enterprises. None of which happened.

To be sure, if China had actually been serious about meeting those commitments, the harm that China’s rise did to U.S. manufacturing would have been dramatically reduced. But in hindsight, you have to ask, “what were they smoking” to actually take PRC officials at their word. Any China scholar knew that since the rise of Chinese Communist Party in the 1930s, their stated commitments could not be counted on reliably.

This is especially interesting given the fact that Long Yongtu, China’s chief negotiator for WTO accession, said in an interview in May, “When we promised to adopt a market economy, we made it absolutely clear that it would be a socialist market economy.” Maybe U.S. negotiators only heard the last two words, or maybe they thought it would at least be better than a socialist command economy.

The Failure of WTO Enforcement

Some defenders of the PNTR decision will argue they didn’t have to believe the Chinese promises of pink unicorns; they were relying on the WTO to hold China’s feet to the fire. Indeed, the belief was that the WTO system would be so powerful that member nations would be forced to become not only free traders (something China has never sought to be), but also part of the Western liberal order. The reality turned out to be that once the Chinese wolves were let in the WTO henhouse, real enforcement was impossible.

This was true for at least two reasons. First, most of what the PRC did to gain unfair advantage through non-market means was “off the books.” The CCP knew that if they codified these practices into law or regulations, it could be used against them at the WTO, so they used informal administrative procedures and “guidance” that got around the WTO rules. This is why a CCP official could say to me with a straight face that China does not require tech transfer for market access. If he means that the PRC has no law requiring it, he’s right. If he means that the CCP doesn’t require it, he’s lying.

Second, U.S. and WTO trade enforcement both ultimately depend on aggrieved parties bringing cases. In the Senate proceedings on the vote, Senator Frank Lautenberg (D-NJ) stated:

Through China’s WTO accession and the establishment of PNTR, we will be able to hold China accountable for its trade commitments through the WTO’s transparent, rules-based dispute settlement mechanisms. If China arbitrarily increases a tariff on an American product or engages in retaliatory actions against the U.S., we could seek redress under WTO regulations… But if we fail to grant PNTR for China, WTO dispute mechanisms will not be available to us.

But U.S. companies quickly learned that if they asked USTR to bring a WTO case, the CCP’s punishment would be swift and severe. So, like any rational actor, they kept their heads down and just took it. As Harry Broadband, Assistant U.S. Trade Representative from 1991 to 1993, stated:

A lot of U.S. firms would come to us and they would complain about Chinese [imports] and say that we had to put in place safeguards, but they’d always add, ‘Don’t tell the Chinese that we came to you and told you this!’ … They knew that if we started punishing the Chinese in a particular sector, they were going to know that it was Company X and Company Y [that complained].

But with any level of understanding of the CCP’s history and operations, both of these behaviors (guidance rather than laws, and mafia-like threats to complainers) and more, should not have been a surprise.

First-Order Thinking

Another reason U.S. policymakers had faith in PNTR was first-order thinking, which went like this: China has high tariffs. With PNTR and WTO, they will have low tariffs. Ipso facto, U.S. exports will go up.

But these believers overlooked three key factors. First, opening up China’s markets also meant opening up our markets. In theory, this should increase both U.S. exports and imports, so the net employment effect on the United States should be zero. But they seem to have overlooked the import part.

They particularly overlooked the offshoring and import part. There was virtually no discussion during the Senate speeches on PNTR that one major result would be American firms moving production to China for export back to the United States. If anything, the view was that low tariffs on exports to China would lead to more production in the United States. Senator Kit Bond’s (R-MO) comments reflected that rosy scenario:

The benefits are not limited to agriculture, despite what has been argued, benefits do extend to manufacturing and other sectors. For example, one company in my state, Copeland, a division of Emerson Electric, manufactures air conditioner compressors in the wonderful town of Ava, MO. Those compressors are sent to China where they are incorporated in units sold all over Asia. As the market for air conditioners in Asia has expanded, the number of manufacturing jobs in Ava have grown. Those jobs will not go to China and if this agreement is passed the manufacturing jobs in the Ava facility are expected to double.

After China was let in the WTO, Copeland proceeded to establish 3 factories in China and multiple R&D facilities.

Third, policymakers over indexed on tariffs. Tariffs are only a small part of how a country can unfairly boost its trade surplus. Devaluing its currency usually has even larger effects, something China did with abandon. As do industrial subsidies, which as Haley and Haley have shown were massive and played key roles in China becoming a manufacturing powerhouse. As does IP theft and forced tech transfer.

Fourth, policy makers thought free trade was the end in and of itself and it was America’s manifest destiny to bring not only democracy to the world, but free trade. In the senate debate over PNTR, Senator Mike DeWine (R-OH) stated:

The fact is, as we all know, the United States is a leader in the area of free trade. If we fail to pass the PNTR legislation, we would be sending a signal to the world that the United States wants to isolate China. That’s a signal we don’t want to send. Both by word and deed, the United States must be the world’s leader in promoting free trade.

It was never clear why the United States needed to be the leader, although history makes it clear that presidential administrations, supported by the State Department, have long been willing to sacrifice U.S. techno-industrial capabilities for the foreign policy goals of ensuring global democracy and free markets. Many of the key advocates for PNTR, including President Clinton, used foreign policy arguments to justify it. Senator Durbin (D-IL), in explaining his support for PNTR stated, “Trade is the future. Make no mistake about it: trade can open up the exchange of ideas—ideas like democracy, freedom of speech, freedom to worship, and freedom of association.”

In other words, the U.S. goal was to help China become freer. The hope was that economic liberalization would pave the way for political reforms and a greater alignment with democratic values and institutions. Indeed, virtually all the Senate opposition was based on concerns for human rights in China, not on whether the deal would be good for U.S. techno-economic capabilities and strength.

Fifth, policymakers assumed continuing U.S. tech dominance. This was after all, the late 1990s, when the U.S. technology boom was in full swing: Intel, IBM, Lucent, Microsoft, Motorola, and others. China, in contrast, could hardly afford bicycles. So, consistent with conventional trade theory—something PRC leaders never accepted—the agreement would allow the United States to specialize in high-tech, high-value goods and services, while China would supply us with t-shirts and Happy Meal toys. The fact that Chinese unfair competition helped weaken or kill Intel, IBM, Lucent, and Motorola appears to be conveniently glossed over.

Water Over the Bridge

As they say, this is all water under the bridge—or, more like water from a broken dam that destroyed the bridge. What is done is done.

The key question is, can we learn from those mistakes going forward? Yes, there are three main lessons, none of which the Trump administration appears to be taking to heart.

First, U.S. policymakers, pundits, and journalists need to be much better at thinking two, three, or even four moves ahead of our adversaries. Simply repeating bromides like “trade is the future” does not cut it. Nor does unreflectively sticking to team loyalties. (“I am against Trump, so I will continue to repeat globalist bromides.”)

Second, policy processes, both in Congress and in administrations, need to be much more deliberate and averse to group think. Whether this entails formal red and blue teaming or other mechanisms to encourage airing a wide variety of expert views, the USG needs to become much better at this. Current interagency processes fall far short.

Third, trade policy has been dominated by lawyers: The task was to eliminate trade barriers, which are still believed to be laws and regulations, so lawyers were the ones who you wanted to lead the charge. But while lawyers can tell you if a contract is good or not, they can’t tell you if it’s the right contract.

Case in point. If trade policy in the 1990s had been led by techno-economic industrial policy strategists, one of the things they surely would have pointed out (if they were any good) was that manufacturing tends toward agglomeration, and if a nation like China could gain adequate momentum—which it has thanks to low costs, forced foreign direct investment and tech transfer, and a global free trade regime that prevents other nations from taking action against unfair practices—it could lead to a vicious cycle where China first becomes the global manufacturing powerhouse and then graduates to become the global innovation leader (as we are now seeing). Meanwhile, other former leaders, including the United States, would lose capabilities, including in the industrial commons, and suffer largely irreversible techno-industrial decline. But individuals with those insights and capabilities were few and far between in the federal government (and they remain so), and to the extent they are there at all, they are like Milton in Office Space, stuck in the basement without his stapler.

Finally, it’s time once and for all to end utopian globalist thinking about free trade. It was a wonderful John Lennon-like vision, one that even looked attainable after the fall of the Soviet Union. But until the PRC is replaced by a true democracy, global free trade will be impossible. They will simply not play by fair rules.

As such, we will need to go back to a pre-1990 trade regime, with the free world economically integrated, and the Communist world limited. That doesn’t mean the same level of isolation that was imposed on the Soviet Union. But it does mean replacing free trade, not with Trumpian protectionism, but with strategic international economic relations. That will be the subject of a forthcoming post.

He distinguished it from “uncreative destruction,” which might destroy a nation’s productive assets through natural disasters, wars, predatory foreign trade policies (China, I’m looking at you), or broader societal decay and limited reinvestment.

Creative destruction, on the other hand, refers to assets being destroyed, either physically or monetarily, because a more effective and innovative alternative has emerged.

The most iconic example of creative destruction—the transformation of England’s textile industry from a cottage industry—was not driven by war, but by the introduction of cutting-edge machinery, primarily the spinning jenny, water frame, and power loom. These innovations destroyed many rural jobs, but they also significantly improved living standards, allowing ordinary Brits to afford clothing. It also gave us the term “Luddite.”

Likewise, we didn’t lose massive numbers of horses in the early twentieth century because of some equine disease; we lost them because people stopped buying horses and started buying cars.

But a natural reaction to this process, one that’s common in dynamic societies, particularly among people high on the empathy scale (e.g., “Caretakers”), is to ask: Can’t we have growth without destruction? We see this today in debates over AI and robotics, where empathic Caretakers (I’m exempting the pure Luddites from this conversation) want to limit job-replacing technologies and allow only those that complement workers.

To be sure, that would reduce some layoffs, a plus for Caretakers. But it wouldn’t eliminate them. Why would an organization invest in AI, robotics, or any other capital equipment—even if it complements workers—if not to boost production and cut costs? Otherwise, where does the return come from?

That means even worker-complementing technologies will still raise efficiency, just not as much as job-replacing technology, and firms will employ at least somewhat fewer workers. Even if a company could expand its market share without any layoffs, the firms losing that share would have to let workers go.

But the reality, at least to hard-hearted realists (me, I’m looking at me), is that job-replacing technology generates more growth. Would we be richer or poorer if the automatic electric switchboard hadn’t been developed and telephone companies continued to rely on manual operators to connect calls? Would we be richer or poorer if we had given longshoremen better winches instead of adopting the standardized shipping container? Would we be richer or poorer if airline ticket agents had better computers but passengers were not allowed to check in for flights on their smartphones? Hint: poorer.

Given this dichotomy between Caretakers and hard-hearted realists, is there any way to square the circle? Thankfully, there is—if Caretakers are willing to accept some pain and realists are willing to show some compassion. In this ideal world, creative destruction would not be opposed; in fact, it would be encouraged. But individual workers who are hurt would be helped to transition to new opportunities.

Perhaps the closest real-world example to this ideal is found in the Nordic countries. While generally supporting creative destruction (albeit less so than the United States), these nations do an excellent job of helping workers transition between jobs through their “flexicurity” model, which balances flexible hiring and firing rules with generous unemployment benefits and active labor market policies.

It would be nice if we had precise measures of a nation’s acceptance of or resistance to creative destruction. But in their absence, I have sketched the following conceptual framework (see figure 1). The x-axis represents the degree to which countries resist creative destruction, based in part on how difficult it is to fire workers and partly on my admittedly subjective evaluation. The y-axis represents the degree to which countries act as Caretakers (e.g., helping workers transition) versus hard-hearted realists (e.g., leaving workers more on their own), based largely on the share of income replaced for laid-off workers after one year.

So, the farther right a nation is on the x-axis, the more it resists creative destruction. And the higher up a nation is on the y-axis, the more support it provides to workers affected by disruption.

Needless to say, the upper-left quadrant is the place to be: low resistance to creative destruction, high growth, and reduced individual hardship from disruption. Think Denmark, Finland, and Sweden, although rising levels of non-EU immigration are prompting renewed debates about the sustainability of their generous welfare systems. And even though these countries are generally more accepting of creative destruction than their European neighbors to the south, they could still move somewhat closer to the U.S. model.

Nations in the upper right generally resist creative destruction—they would rather generate growth by adding new capacity (e.g., building an R&D lab or a chip fab) than by displacing incumbents (e.g., supporting the taxi industry versus ride-sharing apps)—while still providing generous support to displaced workers. Think Belgium, France, Germany, Italy, and Spain. Unfortunately, these countries, rather than the EU nations in the upper-left quadrant, tend to dominate the European government, which is a big reason EU policy is often hostile to creative destruction.

Countries in the lower left are generally comfortable with creative destruction and typically view workers hurt by it as on their own, providing relatively little support. No advanced economy does nothing to help displaced workers, but many don’t do much, and some do even less than others. Enter the United States. Although Luddite forces are sadly gaining ground rapidly, pushing to move the United States toward the lower-right quadrant (resistance to creative destruction, coupled with low worker support)—or, in some cases, toward the upper right via universal basic income (while still resisting creative destruction)—the current system still leans toward growth first, support second. Other countries here include the United Kingdom, Canada, and Australia.

The lower-right quadrant is arguably the worst place to be, at least in terms of creative destruction. It’s the worst of both worlds: These countries are okay with new technologies, as long as no one loses a job (leading them to resist creative destruction, despite enjoying its outcomes), and they don’t provide much assistance for workers hurt by change. Specifically, when disruption occurs, they provide less support than continental European nations. Think Japan and South Korea.

One final note. It’s not clear that even if the United States significantly improved its system for helping dislocated workers—as ITIF has proposed—the growing, increasingly strident chorus opposing technologically driven creative destruction, particularly from AI and robotics, would suddenly take a breath and quiet down.

I’d like to believe that better support would buy more political tolerance for disruption, but I remain skeptical. Ludditism is just too fashionable and too individually rewarding for its advocates now.

So yes, Congress should move the U.S. worker adjustment system closer to the Nordic model. But at the same time, supporters of growth must be prepared to fight politically, rhetorically, and intellectually to preserve America’s comparative advantage in embracing creative destruction.

So, thunder struck, and lo and behold, the temple on high now appears to concede that industrial policy might be okay, at least for lower-income nations. The new tablet, in the form of a report titled Industrial Policy for Development, is supposed to represent a turning point—and an apology from the temple hierarchy for getting it wrong.

Like I said, the World Bank’s departure from orthodoxy created panic among the faithful. Free market ideologues are pissed:

• The Wall Street Journal writes that the “World Bank embraces industrial policy, abandoning three decades of stigma.”

• Reason, the nation’s largest libertarian magazine, says that the World Bank “used to champion markets. Now it’s surrendering to state-led industrialization”; oh, the horror.

• The Washington Post’s now free market-focused editorial board is appalled, declaring that “industrial policy won’t work.”

Okay, calm down. Don’t get your knickers in a twist.

First, if the journalists had actually read the report, they would have found that it is largely a wolf in sheep’s clothing. Not to worry: The World Bank is still committed to its old ideological ways. Sure, it writes that nations can try industrial policy. But it also claims that even if they get it right, it has almost no positive effects, apparently boosting GDP by at most 1 percent.

Second, if countries are desperate for growth, the report says to go ahead and dabble in industrial policy for a few years—but then, by all means, get back to the tried-and-true free market “fundamentals,” like macroeconomic stability and a good business climate.

The report’s key box on industrial policy advice says it all. In order of priority, governments should:

1. Not pursue industrial policy; they should just focus on getting the fundamentals right.

2. Spend little money if they insist on going down this path (that way, they’ll do the least harm).

3. Provide market incentives.

4. Not engage in macroeconomic policies like exchange rate devaluation, even if it makes their manufacturing sectors uncompetitive.

And amazingly, the report states, “More research is needed to understand whether and when general tax credits for research and development in private businesses translate into valuable inventions.”

What? You mean more than 30 years of research, with hundreds of academic studies showing that they do work, doesn’t suffice? Clearly not to the World Bank, which seems to be waiting for a study that says R&D credits don’t work.

Plus, the Bank suggests that while countries may want to pursue industrial policy, they are likely too incompetent to execute it effectively. The fact that some, if not many, governments have not gotten industrial policy right—and the theory and evidence of what constitutes doing it “right” are very clear—leads it to conclude they should avoid it altogether.

This is a bit like saying a bunch of countries got monetary theory wrong, so get rid of your central bank. Or, since various nations failed to properly support education, you might as well do away with your education ministry.

The World Bank chief economist closes his foreword by essentially saying: If you must do this malpractice, don’t say we didn’t caution you first. He writes that the report “warns every government—poor, middle income, or rich—that when it comes to industrial policy, its reach can easily exceed its grasp.”

You can almost hear their anguish and moans. “Damn, we have to say something good about industrial policy. All the countries we help are demanding that we give them something. But we really don’t want to.” You could see them working till the pips squeak.

Let’s be perfectly clear. Despite the patina of economic science, this is simply ideology speaking. Nothing more. The Bank believed then, and continues to believe now, that market failures are very rare (except perhaps pollution), and that government failures are endemic. So, there is nothing countries can do except get out of the way and enable the full working of market forces.

This ignores the theory and evidence that demonstrate why this is wrong, as generations of non-neoclassical economists have advised. These endogenous growth economists, neo-Schumpeterians, institutionalists, and innovation economists have a long and distinguished body of academic work that rebuts and effectively refutes this ideological position. Amazing scholars like Sidney Winter, Richard Nelson, and Richard Lipsey have been treated as heretics by the priesthood and systematically excluded from the establishment.

Which gets me to my main point: World Bank, you screwed up. Not just a bit, but a lot. You led so many countries down the wrong path, and that led to limited growth. Countries that ignored you, like Taiwan, Singapore, South Korea, and, of course, China, prospered.

Chinese policymakers embraced national developmentalism based on Friedrich List and Joseph Schumpeter, rejecting Adam Smith and David Ricardo. As a result, they not only grew dramatically but also sucked up much of the world’s manufacturing oxygen and deindustrialized large parts of the developing world, probably for at least the next half century.

Indeed, China is trying to consign the Global South to Ricardian comparative advantage: Sell us your food, minerals, and energy, and we will sell you advanced goods. To which World Bank economists cheer and say, “Ah, see free markets and globalization at work.” At least the IMF has a few economists who really understand industrial policy and are allowed to write about it.

It’s not great to be wrong for a generation. But at least have the courage to say you were wrong—which this report fails to do.

Let’s be honest: The World Bank won’t change its ideological religion or the terrible advice it continues to give. Only the creation of a new institution, guided by new growth theory and national developmentalism, will result in change. And that certainly won’t happen as long as China and the United States control the Bank.

China wants the Bank to continue to preach Ricardian economics so it doesn’t face competitors in the Global South. And the U.S. is too ideological to know that neoclassical economics is a failure. So, the result is that the Global South turns to China for advice, seeing how it was one of the few countries that broke out of the low-income trap. Except they don’t know that China has no interest in helping them. And developing nations keep struggling.

Nah, just kidding. Not going to happen, even though masses of pundits, journalists, economists, and think tankers have jumped on this cool-kid bandwagon to sound the alarm.

One paper published by Brookings—which, by the way, proposes taxing AI to slow it down—argues that “rising automation of intelligence tasks increases and then decreases wages.” In other words, the economy expands significantly, but wages go down.

How do we know they’re correct? Easy, they use cool math like: dγ/dL = ∂γ/∂P · dP/dL + ∂γ/∂I · dI/dL. Case closed.

Here is my math: G × (1 + p) = G1, where G is output, p is the rate of productivity growth, and G1 is the size of the economy after productivity growth.

Another paper, by Philip Trammell and Anton Korinek, the latter an economist who seems to make a living scaring people about AI, also uses elaborate math to conclude that, because of that damned AI, wage inequality may grow such that many people cannot earn enough labor income to live on. Well, that doesn’t sound so bad.

And the media laps this stuff up. Dustin Guastella’s The Guardian headline reads, “AI will make the rich unfathomably richer. Is this really what we want?” I don’t know, Dustin. Let me think about that. NPR’s Morning Edition tells us that “AI could widen the wealth gap.” You get the idea.

Here’s why all this is, at worst, wrong and, at best, vastly overstated. There are at least three theories underlying the case that AI will exacerbate inequality.

The first is that only a few companies will control the AI means of production. And since they will have an oligopoly, they will make massive profits. Imagine that, because of AI, GDP could magically rise from $27 trillion to $100 trillion by 2050 (it won’t happen, but let’s pretend). In the wealth-gap alarmists’ world, the three or four AI companies would pocket profits north of $75 trillion per year. Right.

This is obviously far-fetched, but it’s worth explaining why. There will still be car companies, hotel companies, insurance companies, consulting firms, and—dare I say—think tanks. While most may use AI to boost productivity, they will be purchasing it from companies that must compete for their business. So AI companies won’t be producing everything and capturing all the profits; they’ll be producing a tool that other companies use. Moreover, these AI giants will have to compete for customers, which means their profits, while likely robust, will still be constrained.

If that first scenario is science fiction, the next one is no less so: the idea that AI will do all jobs. You know the story everyone tells today—workers are left destitute, and if their AI overlords are feeling generous, they let governments redistribute some of their exorbitant wealth to the masses through universal basic income.

This won’t happen. For now, consider undertakers, kindergarten teachers, plumbers, police officers, firefighters, chefs, nurses, dentists, and carpenters. Regardless of how capable robots become (and they still have a very long way to go before handling jobs of this complexity, whatever Elon Musk may claim), they will not be doing these jobs. Automation may eliminate some roles, but that drives down prices, giving people more purchasing power to spend on other things, which in turn creates compensating jobs elsewhere.

Okay, setting aside these two far-fetched theories, there are more plausible ones. The third scenario, again from Brookings, is that “AI could increase inequality by giving a stronger productivity boost to already highly-paid knowledge workers, while leaving many lower-skilled workers in in-person service and manual labor jobs behind.”

But they have it backwards. Eliminating half the high-wage jobs—think lawyers, consultants, and psychiatrists—would actually reduce inequality, because it would mean that middle- and lower-income people can pay less for services currently provided by high earners, and there would simply be fewer workers earning those high incomes.

Besides, income inequality is not really driven by the fact that your doctor earns half a million a year; it’s driven by the fact that an NBA star earns $50 million and a hedge fund manager earns $500 million. Income inequality is, first and foremost, a winner-take-all phenomenon. AI won’t change that, unless we can automate the obscenely rich stock-trading class.

In the meantime, let’s scratch this AI fear off the list. It’s not like the AI doomers lack discussion topics. They clearly have plenty more they can turn into TED Talks.

The message from Brussels has been clear: Large U.S. tech companies have no right to give European consumers and businesses what they want. Only less innovative EU companies can do that.

You know what? We Americans agree with this principle completely. Which is why we are insisting on the immediate investigation and regulation of what we call “Big Spread,” including the potential breakup of Nutella.

It’s time for spread sovereignty.

As former FTC Chair Theory Britannia recently wrote:

As individuals, we spend four to five hours a day engaging with the delights of hazelnut-chocolate spread, from bread and pastries to eating it straight out of the jar late at night. It is essential, therefore, that we have control over how the spread space is organized, structured, and regulated.

Hear, hear! I mean, consider the facts. Ferrero, an Italian corporation that started in the small town of Alba, Piedmont, with nothing but a big dream—and now operates as a global powerhouse headquartered in Luxembourg—has achieved a stranglehold over the American breakfast table that would make Mark Zuckerberg blush.

There is no meaningful domestic competitor. American children have been algorithmically—or rather, hazelnutically—nudged into Nutella dependency from an early age. Parents report feeling unable to switch from that mouthwatering spread. Indeed, the switching costs are enormous.

Try telling a nine-year-old to use organic American almond butter. You cannot.

And let’s be clear: this is “Big Spread.” Ferrero has roughly quadrupled its sales since 2018, when it already held a dominant position in the expanding U.S. spread market.

Where is the American Nutella? It does not exist. Ferrero has used its dominant market position, its network effects (once Nutella enters a household, it spreads—literally), and its addictive interface design (that distinctive jar, seamlessly optimized for hands of all sizes) to crush any domestic alternative before it could scale. And where it could not, it bought competitors up through classic “killer acquisitions.”

This is precisely the behavior Brussels claims to find intolerable when Americans do it.

Google offers other search engines. Apple allows third-party browsers. But Nutella? Name one open-jar competitor with equivalent market penetration. Once again, you cannot. The hazelnut-chocolate spread market is a de facto monopoly, and Washington has done nothing about it.

The national security implications alone should trigger a CFIUS review. Ferrero controls the morning mood of millions of Americans, ages five to ninety-five. And he who controls breakfast controls the workforce pipeline. Europe knows this! That’s why they kept the good stuff and exported the rest here.

We are not against trade. We are not against hazelnut-chocolate deliciousness. We are simply asking for the same standard to be applied in both directions.

If European regulators can demand that American companies interoperate, open their platforms, and face structural remedies for dominance, surely American regulators can demand that Nutella jars carry a label reading: “This product was produced by a foreign monopolist with zero domestic alternatives. The FTC is aware.”

But the FTC needs to do more than be aware. We need a “Spread Services Tax,” under which large foreign spread companies would pay 5 percent of their U.S. revenues to the federal government.

Congress needs to pass a Hazelnut Products Agreement (HPA) that designates sellers with annual sales above $2 billion as “gatekeepers.” With that designation would come obligations, meaning they could no longer discriminate against America’s mom-and-pop spread businesses. This would require mandatory disclosure of their recipe and customer list to any American hazelnut-chocolate spread provider. And if they are found in violation, the FTC would have the authority to fine them up to 5 percent of their global revenues.

In addition, legislation should charge the FTC with bringing cases against any spread firm that has acquired American companies in the past decade with the intent of rescinding those mergers. Do Americans want long-admired companies like Keebler and Butterfinger to be owned by foreign corporations?

And of course, Ferrero and the other European monopolists want us to abandon our hard-fought regulatory protections for American consumers. That is why we need to make it illegal for foreign spread companies to scrape publicly available images of Americans enjoying Nutella, because, as we all know, those images will be used in breakfast recognition databases that identify us.

Like Theory Britannia said:

America’s vast spread market is open to all. But those who want to benefit from it must abide by our conditions. If our trading partners have no respect for the rules, then they have no access to the market.

To be sure, Ferrero invests heavily in the United States, spending more than $5 billion over the past five years on North American manufacturing and logistics to support its growth. Since 2020, it has invested in a new innovation center and R&D labs in Chicago, expanded its manufacturing plant in Illinois, built three new distribution centers across the United States, and expanded its corporate headquarters in New Jersey.

But none of that changes the fundamental problem: Ferrero is not American-owned. We need spread sovereignty.

With no global Big Spread leaders of our own, the United States must now combine ambitious regulation with massive infrastructure investment, sovereign innovation, and talent development.

Critics say this effort would waste billions by replicating existing products and technologies, tie up our best engineers, and deliver no real strategic impact. Some even argue that the United States’ resources would be better spent on R&D in critical sectors where it could scale and eventually lead.

I say those critics aren’t thinking very critically. Spread sovereignty will allow us to regain control over our infrastructure, reduce dependence on foreign actors, and protect our fundamental rights. We must resist external pressure and assert the strength of our sovereign industry.

Until then, Europe will continue spreading—across our toast, across our children’s lunches, and, apparently, across our digital regulatory vocabulary too—its dominance in the United States and around the world.

(The author of this article accepts no funding from Jif, Skippy, or any hazelnut-chocolate lobby. Yet.)